We Study Billionaires - The Investor’s Podcast Network TIP702: Hedging Against Market Crashes w/ Kris Sidial
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Feb 28, 2025 Kris Sidial, co-investment officer of Ambrus Group, dives into the world of tail risk hedging. He reveals how this strategy can shield investors from market crashes and enhance long-term returns. Kris discusses the volatility index (VIX) and examples of historical market downturns where tail risk strategies excelled. He emphasizes the importance of strategic cash positions and the psychological biases that can lead to underestimating market risks. Plus, he shares insights from legendary traders that shaped his investment philosophy.
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Tail Risk Hedging Definition
- Tail risk hedging protects portfolios from extreme downturns, like portfolio insurance.
- It profits when markets crash, offering uncorrelated returns during normal times.
Use Options for Tail Risk
- Use options for tail risk hedging due to their asymmetric payoff profiles.
- These offer substantial upside during market crashes.
Understanding VIX
- The VIX, calculated from S&P 500 option prices, reflects market fear.
- It can be considered "volatility on steroids" due to its variance-based nature.
