Excess Returns The Retail Rally Trap | Kris Sidial on Market Fragility and the Risks of Buy the Dip
May 6, 2025
Kris Sidial, Co-CIO and founder of Ambrus Group, specializes in volatility trading strategies, while Brent Kochuba provides vital market insights. Together, they discuss the underperformance of tail risk funds and the critical need for robust volatility strategies. They explore market liquidity’s fragility, retail's surprising role in recent market moves, and the psychological traps that hinder effective trading. Additionally, they analyze how volatility may remain elevated longer than anticipated, unraveling the complexities behind current market dynamics.
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Effective Tail Risk Hedging
- Tail risk hedges can make significant money during market dislocations to offset portfolio losses.
- Correctly implemented strategies avoid bleeding capital over time, unlike naive monthly option buys.
Power of Rebalancing
- Having a portfolio component that pays off when equities crash enables beneficial rebalancing.
- Rebalancing into discounted equities after market drops compounds returns over time.
Volatility Drivers: Positioning and Policy
- One-sided positioning and large policy reforms create heightened volatility.
- Markets struggle to digest aggressive policy changes, causing unpredictable price swings.