Devin Anderson - Exploiting Behavioral Biases

Devin Anderson, CEO and co-founder of Convexitas, stops by The Business Brew to discuss his firm's approach to risk management via options strategies. In short, Convexitas seeks to exploit structural options mispricing resulting from market participant's biases. What does that mean in plain English? Well, there are people that sell financial yield strategies that involve selling puts and selling covered calls. If enough of the market does that there is a chance the front month option pricing is not high enough. In that case, Convexitas might consider purchasing some of those options.

Why is Devin worth listening to? Before Convexitas, he was at Deutsche Bank for 15 years where he most recently was Managing Director and Head of Solutions in the Americas leading the structuring and sales teams which designed and distributed the risk premia, retail structured product, and the fund derivative businesses. His Deutsche Bank experience also includes covering institutional clients for listed options and OTC derivatives. Prior to the financial services industry, Devin had a previous career in technology where he held both engineering and sales roles at two early stage internet service & datacenter hosting providers, and former search engine Lycos. He holds a Bachelor of Finance from the University of Pittsburgh and an MBA from Carnegie Mellon, where he also guest lectures on options and option market micro-structure.

In short, the guy is smart and you can learn something.

Enjoy the episode. Hope you enjoyed this show note!

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Detailed Show Notes - 

2:00 - Devin's background

6:25 - Convexitas is a very risk focused firm

12:00 - The decision to reduce risk vs. manage risk

15:15 - What Convexitas is very good at

19:40 - Why an options thesis should start with the behavioral biases of the options market

24:50 - An options position should be better than a resized cash position

27:30 - If at any time short options strategies are changing your lifestyle then you should probably do less of it

35:00 - What about options counterparty risk?

37:30 - A discussion of one day options and why they exist (hint: they are a great business for market makers)

41:50 - How was Convexitas started?

45:10 - Does AI help Convexitas and/or is it a risk?

53:00 - It's not actually the risk, but how you manage to the risk

57:40 - The difference between financial products and investment products

1:01:25 - Performance under pressure and mindfulness