Monetary Matters with Jack Farley cover image

Monetary Matters with Jack Farley

Kris Sidial: "Graveyard Day" Is In Store For Short Volatility Traders

Sep 22, 2024
Kris Sidial, Co-CIO of Ambrus Group, shares his expertise on volatility markets and the recent sell-off in August. He discusses the dangers for short volatility traders, emphasizing the deepening risks as market conditions fluctuate. Kris analyzes how VIX pricing is impacted by market mechanics and liquidity challenges. He also highlights the importance of portfolio rebalancing and diversification to mitigate potential downturns. With insights on tail risk and the challenges in options trading, this conversation is a must-listen for market enthusiasts.
01:16:33

Episode guests

Podcast summary created with Snipd AI

Quick takeaways

  • Kris Sidial discusses the heightened risks associated with short volatility trading, suggesting a potential 'graveyard day' for traders due to market instability.
  • The podcast highlights the resilience of short volatility strategies, noting their ability to recover and attract inflows even after significant sell-offs.

Deep dives

The Impact of Recent Volatility Trends

The volatility market witnessed significant changes in August, marking a pivotal moment for investors. A substantial sell-off occurred early in the month, which Chris Cydial highlighted as unusual when compared to the stable environment of the last few years. This turmoil led to notable decreases in short volatility investments, which had previously enjoyed steady inflows due to their attractive income generation properties. A sudden shift in market dynamics coupled with a heightened correlation between the S&P and VIX rates brought immediate attention and raised concerns about the sustainability of these short volatility strategies.

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