Today I am joined by Hari Krishnan, Head of Volatility Strategies at SCT Capital and author of the books Second Leg Down and Market Tremors. We begin with a discussion of Hari’s newest book, Market Tremors, and the main theoretical idea: Mean Field Theory.  Hari lays out both the philosophical underpinnings of the concept as well as how one might interpret it in practice.  This leads into a natural discussion of dominant agents, including examples of who they are, how we might go about identifying them, and why they are so important to consider. In the back half of the conversation, we tackle some more practical considerations of tail risk hedging.  This includes key differences between equity and rates markets, how we might structure hedges in today’s market environment, how to navigate path dependency, and why it’s all just a “bag of tricks.” Please enjoy my conversation with Hari Krishnan.

Hari Krishnan, head of volatility strategies at SCT Capital Management, discusses his research on commodities, weather volatility, and the relationship between implied and realized volatility. They explore finding upside convexity in commodity options, the structural bull case for commodities, and the challenges of predicting weather compared to the stock market. They also examine the correlation between volatility and stock prices, the impact of interest rates on various markets, and the liquidity of futures contracts.

Hari Krishnan discusses the challenges of investing in commodities, the concept of commodity super cycles, overcoming holding and storage difficulties, and the value of 'virtual storage' in trend following systems.

Hari Krishnan, Head of Volatility Strategies at SCT Capital, explores developing a low carry hedge for a commodity bull market by understanding market positioning, price impacts, perishability, and seasonality. The podcast discusses depressed commodities, producers' incentives, return skewness, fundamental analysis, liquidity constraints, and low-cost, high-convexity strategies in futures and options markets.

Hari Krishnan, an author and hedge-fund manager, dives deep into the fascinating world of virtual warehousing for commodities. He discusses the challenges in the natural gas and power markets, shedding light on investment strategies influenced by geopolitical factors. The duo explores the dynamics of storable versus non-storable commodities, detailing how storability impacts pricing and trading strategies. They also touch on backwardation in markets and highlight how farmers can navigate the potentials of commodity supercycles. A must-listen for aspiring investors!