The Derivative

WTF is this market? - with Vineer Bhansali of LongTail Alpha

Apr 11, 2025
Vineer Bhansali, Founder and CIO at LongTail Alpha, is an expert in tail risk hedging and volatility. In this discussion, he tackles the recent market turbulence, highlighting the implications of liquidity challenges and the shift towards automated trading. He discusses strategies like 0DTE options and emphasizes the potential decline of American exceptionalism impacting the U.S. dollar and gold's resurgence. Bhansali also dives into market distress indicators and the Fed's role in stabilizing rates amidst ongoing economic uncertainty.
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INSIGHT

Market Liquidity Crisis

  • Futures market liquidity has evaporated, with order book depth at a fraction of normal levels.
  • This low liquidity is a symptom of a broader issue affecting stocks, bonds, and derivatives.
INSIGHT

Impact of Zero DTE Options on Market Stability

  • Retail traders selling naked zero DTE options contribute to market instability.
  • Their absence from the market removes the usual "buy the dip" support.
ADVICE

Short-Dated Options: A Gamble

  • Avoid short-dated options due to their unpredictable nature, resembling a coin flip.
  • Volatility is not a reliable metric for short-dated options in the current market.
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