When people think about the market mania we recently experienced, the most glaring thing that comes to mind is the meme stocks. In early 2021, the huge moves in names like AMC and GameStop exemplified this new Robinhood, r/WSB, crypto world. But there were activities much more egregious than some retail traders buying odd lots on Robinhood. Serious, professional investors and traders lost huge sums of money giving out unsecured loans to crypto hedge funds like 3AC, which then proceeded to incinerate their money. In other words, lots of people, with a range of sophistication, threw out some basics of risk management wholesale. On this episode of the podcast, we spoke with Benn Eifrt, founder and CIO at the boutique volatility hedge fund QVR Advisors, about how manias happen, and the big lessons everyone should learn from the market over the last two years.See omnystudio.com/listener for privacy information.

Today I am speaking with Benn Eifert, founder and CIO of QVR Advisors. Benn is my first repeat guest on the podcast, making his first appearance in Season 2. When I asked listeners who they wanted on for Season 3, he was high on the list. In this episode, we take things in a bit of a different direction. Rather than a normal interview, I use this opportunity to ask Benn about his opinion on a number of different trade ideas, from covered calls to shorting VIX ETPs. Benn walks me through the subtleties of each trade and why the PnL of what might look like a simple trade can be incredibly nuanced. Towards the end of the conversation we turn to broader market topics and discuss the general impact of structured product desks and options dealers as well as Benn’s view as to whether March 2020 will create a lasting impact on volatility markets. I hope you enjoy my conversation with Benn Eifert.

We’re rewinding to Season 3, Episode 3 to chat with Benn Eifert, founder of QVR.   Benn was my first repeat guest and this is probably one of our more popular episodes. Instead of the usual interview format, I called this episode “Bad Ideas with Benn Eifert,” and basically just asked him a bunch of questions about naive option trades and whether they are a good idea or not. For anyone starting their journey with options or volatility, the whole episode is a must listen. The clips I chose here were selected because I thought they provided a really good cross-section of topics in the world of options while highlighting one important common thread: the risk of unintended bets.  I think this is one of the most universally important concepts in trading and investing, and Benn really drives the points home here as we cover topics ranging from writing options for income to why VIX minus realized doesn’t mean what you think it does.  The subtle through line is the reminder that it’s what we don’t know we don’t know that will eventually get us in trouble.

I am joined today by Benn Eifert, founder of QVR Advisors.  QVR specializes in managing option-based strategies and Benn describes what he does as volatility investing. We quickly wade into the deep end with this one.  Benn schools me on relative value investing and dismisses my favored mental model of style premia for what he prefers to call “the Star Wars framework.” We chat about volatility ETPs, their impact on the volatility landscape, and how the market has changed since February 2018.  And with some spectacular option-driven blow-ups in the last couple of years, I ask Benn for his guidance on how he would think about due diligence in the space. Finally, while Benn deals exclusively with institutions at QVR, I get his thoughts on how volatility investing might play a role for individual investors.  We go deep with this one.  So let’s dive in.

Benn Eifert, Managing Partner of QVR Advisors, shares his journey of building a $2 billion hedge fund. He emphasizes that trading skill alone isn't enough; success also hinges on interpersonal communication, operational management, and marketing. Eifert discusses the rise of pod shops in the hedge fund space and the importance of authenticity in social media. He highlights diverse interests that foster relationships and the complexity of options trading, cautioning against the democratization of investment strategies while navigating their inherent risks.