Mutiny Investing Podcast

In this episode, I sat down to talk with Jason about the market events of March 2020. We start by talking about why many narratives around the market crash may be wrong and the evidence that what we have seen so far is maybe not a harbinger of a crashing economy but rather an institutional liquidity crisis. We then talk through some historical analogies to give investors a basis for thinking about what is to come. We talk about 2008, the 1987 flash crash and the less known Hong Kong Flu of ‘69 crash. Finally, we talk about how investors can be prepared for any eventuality and strategies for protecting against a second or third leg down in markets. I hope you enjoy this conversation as much as I did.

In this episode, we talk with Jeff Malec. Jeff is a principal at RCM Alternatives, a leading firm in the futures industry.   Jeff began his career in the Chicago futures pits with burly traders spitting into their dip cups and has had a front-row seat to watching the futures industry develop rapidly over the past two decades.   We talk about the differences between the New York traditional equity-based markets and Chicago’s futures markets and the pros and cons for investors.    We look at why Chicago’s approach did much better in 2008 and what investors can learn from that to apply to their own portfolios as well as the cash efficiency of futures.   We dive into how investors should think about correlations, particularly when projecting into the future.   We also talk about the common traits of the most successful investors Jeff knows, particularly the engineering mindest and how other investors can apply that.   Finally, we dive into why low volatility often means hidden risk and how to spot it in your portfolio.   I hope you enjoyed this conversation as much as I did

Alex Orus is a principal at Principalium Capital based in Zurich, Switzerland. Alex is one of the most experienced traders of the volatility index, often called the VIX, having founded Blue Diamond Capital which traded the VIX starting in 2010.   In this conversation, we talk about risk and how many investors measure risk in a way that actually increases their risk. We then dive into the history and the structure of the VIX and its associated products and how investors can trade it to improve the performance of their portfolio.   There were a couple of terms Alex talked about in the interview that I wanted to introduce. Alex mentions a few times an event in February 2018. What happened was that VIX went from 13 to 37, nearly a 300% move in a day which was it’s largest percentage move in history causing large losses or large gains for traders on either side of the market.   We also talk about mean reversion. Mean reversion is the idea that an asset moves back to its long term average. So the VIX’s long-term historical average is around 20 so if the VIX spikes to 40, then moves back towards 20, we call that mean reversion.   I hope you enjoy this conversation with Alex as much as I did.

In this episode, we talk with Bastian Bolesta, CEO of Deep Field Capital, a systematic long volatility manager based in Switzerland.    We start off by talking about the difference between systematic and discretionary trading styles and why systematic may make more sense if you live in what Bastian calls Chaotistan instead of Normalstan.    We then dive into the difference between Momentum and Trend styles of investing and the types of markets that each thrive in, how using a Sharpe ratio to measure risk can actually increase the risk of a portfolio.   We also talk about the benefits of trading markets intraday instead of holding positions over night and when it makes sense. Finally, we talk about the relationships between US, Europe and Asian markets and how investors can take advantage of it.   I hope you enjoy this conversation as much as I did.

Tom O’Donnell is a principal and a managing direction at 3D Capital Management. Tom began his career at the Virginia Retirement System where he pioneered the use of alternative investments to mitigate portfolio risks. Since then, Tom’s 30-year career has been devoted to reminding investors that markets move in two directions: up and down. Tom has been finding and using alternative investment strategies to reduce risk and enhance returns across the business cycle. In today’s conversation, we talked with Tom about this history of the Managed Futures industry, the relationship between returns and assets under management, and how investors should think about combining short and long volatility investments. In the interview, Tom mentions a financial instrument called the e-mini. The E-mini is a commonly traded futures contract that is worth one-fifth of a full S&P futures contract, but for the purposes of our contract, it can just be thought of as a S&P contract.

In this episode, we chat with Hari Krishnan of Doherty Advisors. Hari is a volatility macro-focused hedge fund manager and the author of The Second Leg Down, a look at practical approaches to profiting after a market shock. We start the conversation with Hari by talking about the academic theory that suggests hedging is not a good long-term strategy and how his experience of the practice differs from what theory would predict. We then get into Hari's view on ETFs and the potential systemic risk they pose to markets more broadly, and, what investors can do to manage that risk. We look at common mistakes investors make when hedging including hedging too literally and too reasonably. Hari believes that investors typically buy options for scenarios that seem plausible when they should focus on how options will be repriced as volatility unfolds. We then go into hedging strategies for different parts of a crisis, what Hari calls the first and second leg down. Hari has found that strategies that looked cheap before the first leg down tend to look expensive after and investors should adjust their hedging strategy as a result. Finally we go into the role of Algos and machine learning in markets and how Hari’s views there have changed over time. You can find out more about Hari by buying his book 'The Second Leg Down: Strategies for Profiting after a Market Sell-Off'.  

In this episode, we chat with Chris Cole, founder and chief investment officer at Artemis Capital Management. Chris is an expert in long volatility strategies and has a knack for coming up with analogies to explain them. We talk about why Dennis Rodman is arguably one of the best basketball players of all time despite scoring less than eleven points per game and what investors and individuals can take from that in terms of how they think about diversification. We also discuss why George Lucas may have been the greatest volatility trade of all time, why forgoing gains in a long volatility strategy in the first leg down after markets drop 3,4,5% is a better long term strategy and what Chris thinks about fixed income like government bonds as a hedge against market crashes going forward.

In this episode we chat with Wayne Himelsein, president and chief investment officer at Logica Capital. Wayne has spent over two decades managing long/short portfolios and so brings a wealth of experience to the conversation.   We talk with Wayne about a concept called negative skew and how it leads many investors to underestimate the risk in their portfolio (as well as what investors can do to protect against it).   We dived into the concept of ergodicity, an idea that I initially discovered through Nassim Taleb but that has become a very valuable mental model for me for looking at both markets and life in general.   We dove into the pitfalls of diversification and how many investors engage in naive rather than what Wayne calls thoughtful diversification as well as why you only need to be right 54% of the time.   You can find more of Wayne on Twitter (@WayneHimelsein).  

In this episode, we flip the script and have our good friend Jeff Malec interview Jason and myself.   We start by talking about our backgrounds, mine in marketing cat furniture and Jason’s in selling Turkish rugs among other things and walk through how those led us to look for solutions to protect our own portfolios.   We dive into the portfolio construction philosophy underlying the Mutiny investment strategy and how it can help investors decrease their risk and increase their returns.   We then talk through the major tail risk and long volatility strategies and explain what each is really doing under the hood.   We then go into all the considerations around how to protect against a black swan: focsuing on the value of ensembles and diversification across long volatility and tail risk managers, strategies and market microstructures.    I hope you enjoyed this conversation as much as I did

This podcast is an open-ended exploration of topics relating to growing and preserving your wealth including investing, markets, decision making under opacity, risk, volatility, and complexity. Mutiny Fund is a multi-strategy long volatility fund designed to give retail investors a way to insure their portfolios against volatility, tail risk, and black swan events. This is the fourth episode of a four part series where Jason and Taylor discuss the thesis behind Mutiny. In the previous episodes we’ve explored diversification and the use of volatility as an asset class. In this episode we’ll be looking at different ways to execute a particular long volatility strategy of equity tail hedging. We’ll be discussing rolling puts, options, straddles, strangles, volatility arbitrage and shorterm downcapture.     Copyright © 2019 · Mutiny Fund does not warrant the accuracy, reliability or completeness of any information contained in this electronic communication and its contents are intended for the recipient only. “Mutiny Fund” is a DBA of Three Magnolia, LLC, its affiliates and subsidiaries. This material has been prepared by a sales employee and is a solicitation for entering into a derivatives transaction and shouldn’t be considered a research report. Trading futures, Options on Futures and retail off-exchange foreign currency transaction involves substantial risk of loss and is not suitable for all investors you would consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more than your initial investment. Options, Market data, and recommendations are subject to change without notice. Past Performance is not necessarily indicative of future results.