Odd Lots
Why the Short Volatility Trade Is Back and Bigger Than Ever
Jan 29, 2024
Kris Sidial, Co-CIO of Ambrus Group and a volatility trading expert, dives into the booming short volatility trade in today's financial landscape. He discusses how investors are increasingly betting on low volatility, even amid rising market risks. The conversation covers the rise of ultra-short options and their implications for market stability. Sidial also highlights the strategic shifts institutions are making in response to these trends, making it clear that navigating this complex environment demands sophisticated approaches.
45:10
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Quick takeaways
- Shorting volatility has become increasingly popular again, with a rise in volume of shorter-dated options and other derivative instruments.
- The resurgence of the short volatility trade has led to concentration of risk and potential challenges for market makers and dealers.
Deep dives
Short volatility trade and its popularity
The popularity of shorting volatility has returned, despite the potential for one-off events and increased market uncertainty. Shorting volatility post the 2008 financial crisis became popular due to low interest rates and central banks suppressing volatility. However, shorting volatility has become increasingly popular again, with a rise in volume of shorter-dated options and other derivative instruments. This raises questions about why short volatility is back and its implications for the broader market.
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