The Derivative

Does all this Machine Learning stuff really work? If it’s so good, why aren’t AI powered hedge funds printing money? And what is the difference between AI, machine learning, deep learning, machine trading, and more. Today’s guest is one that’s been at the center of the AI/MT/ML universe for over four decades. Ernie Chan runs a machine learning hedge fund at QTS Capital management, has authored 3 books – with the 4th on the way - and is the creator of PredictNow.ai. Ernie is joining us on The Derivative to talk about machine learning, decision trees, factors, and more factors, Niagara-on-the-Falls, bells & whistles becoming commonplace, Tim Hortons, the basics of machine learning, Les Miserable, ensemble approaches (diversification), classification vs regression, random forest techniques,  the merging of AI and Machine Learning, PredictNow.ai, supervised vs unsupervised learning, Harry Potter (instead of Star Wars), and the effects of machine learning on the market. Chapters: 00:00-02:45 = Intro  02:46-22:38 = Complicated Machine Learning - Going Back to Basics 22:39-38:45 = Basics of Machine Learning, ML vs AI + Unsupervised Learning  38:46-46:34 = PredictNow.Ai  46:35-01:06:07 = Take Us to QTS / You can Still Gain an Edge  01:06:08-01:10:46 = Favorites You can view and download Ernie’s QTS performance track record via the links below: QTS Capital Management, LLC. Tail Reaper, QTS Capital Management, LLC. QTS Partners, L.P. (QEP Only), QTS Capital Management, LLC. VIX Timer (QEP only), QTS Capital Management, LLC. (Chimera QEP only) Follow along with Ernie by checking out his published work, following him on LinkedIn, and taking a look at PredictNow.ai & the QTS website. And last but not least, don't forget to subscribe to The Derivative, and follow us on Twitter, or LinkedIn, and Facebook, and sign-up for our blog digest. Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit www.rcmalternatives.com/disclaimer

Our guest today is somewhat of a modern philosopher, mapping out how the investing world sees the real world, while at the same time questioning his own place in that world and how he can change it for the better. Ben Hunt, Co-Founder of Second Foundation Partners and creator of the Epsilon Theory blog, joins us on The Derivative, offering up his fresh perspective and novel insights into market dynamics. Today, Ben is sharing his knowledge on identifying narrative patterns, how to be authentic in the hedge fund world, new trading strategies, living on the “farm” (depending on whose definition), starting a software company, Tom King comic books, models based on narrative research, the market being a bonfire,  returning investor $$, the beginning of Epsilon Theory, narrative maps, AI vs AP, the investing industrial complex, being authentic, FANG diminishing the narrative approach, aggregating N-95 masks & raising a million dollars for COVID, Ben’s affinity for goats, and the “game” of markets. Take a look at a few examples of Ben’s narrative maps of all articles published on CNBC website, Central Bank Omnipotence, and building the narrative machine. Chapters: 00:00-02:16 = Intro 02:17-27:55 = From a farm in Connecticut, Philosophy, to Figuring out “The Patterns” 27:56-51:40 = The Investing Industrial Complex, is the Market a Bonfire? Narrative Structure not Sentiment 51:41-1:03:28 = Dealer Gamma Hedging and Creating a Story 1:03:29-1:09:53 = N95 Masks - Let us feel Good about the world 1:09:54-1:15:39 =Favorites Follow along with Ben Hunt on Twitter (@EpsilonTheory), the Epsilon Theory & Second Foundation Partners website, and connect with him Twitter on LinkedIn. And last but not least, don't forget to subscribe to The Derivative, and follow us on Twitter, or LinkedIn, and Facebook, and sign-up for our blog digest. Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit www.rcmalternatives.com/disclaimer dedicated to the improvement of both the investment industry and human-kind through the lens of authenticity and morality – and for that, we tip our hats.

Votes are being counted, CNN and Fox are on 24-hour reporting cycles, and Tweets/FB Posts/Texts are still being sent out at lightening speeds. What happens if a winner isn’t announced for 2 or more days? What happens if President Trump remains in power? What happens if former Vice President Joe Biden takes over as POTUS? In today’s U.S. Election – What^%$# Episode we’re joined by Matt LaViolette, Founder & Principle at Breakout Funds, and Kris Sidial, Vice President at Ambrus Group talking about avoiding blue waves, election shell shock events, and volatility rallies. Chapters:  00:00-01:40 = Intro 01:41-21:23 = Backgrounds, Avoiding Blue Waves & Possible Shell-Shock Effects 21:24-35:38 = Are We in a World When Vol Rallies? Reflation? and Thoughts on Energy 35:39-49:09 = The Fed, Are They Out of Bullets? + Final Thoughts & Shocks Follow along with Kris Sidial on Twitter, LinkedIn, and The Ambrus Group website. Follow along with Matt LaViolette on his previous The Derivative episode, Twitter, LinkedIn, and the Breakout Funds website. And last but not least, don't forget to subscribe to The Derivative, and follow us on Twitter, or LinkedIn, and Facebook, and sign-up for our blog digest. Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit www.rcmalternatives.com/disclaimer

For every option buyer, there is a seller. The brave souls who are accused of picking up pennies in front of a freight train. But are they dumb? Crazy?  Or just better at timing the market than the rest of us? Understanding option strategies which involve collecting premium seems easy, but there’s way more that goes into this recipe. As Jeff Malec asked our guest in this pod “Give it to me straight, partner” (41:25 mark) in the world of options selling. Mark Adams, Assistant Portfolio Manager and Chief Quantitative Officer at Warrington Asset Management is here to break down exactly what means to be an options specialist and the struggles and successes of operating options-based strategies. We’re talking with Mark about Dallas Cowboys, Volmageddon, stock buying for COVID, FANG+ as part of the index, short gamma trades, free put options, moving from the Federal Reserve to Warrington Asset Management, short vol developing a short or long bias, equity replacement strats, top TX BBQ spots, where the market makers are hedging, explaining complex strategies to RIAs, and the biggest mistakes people make when selling options. From the episode: LJM – the autopsy blog. 00:00-01:42 = Intro 01:43-11:17 = Background Texas Bred to Internship turned Partnership 11:18-25:26 = Digging into the Fundamentals 25:27-47:34 = Volmageddon – Tactical vs Strategic 47:35-57:34 = Everything from Greek Indicators to Calls & Puts 57:35-01:00:01 = Terminal Breakevens 01:00:02-01:03:36 = Testing Strategies 01:03:37-01:11:04 = Favorites Follow along with Warrington & all of their funds at warringtonasset.com. And last but not least, don't forget to subscribe to The Derivative, and follow us on Twitter, or LinkedIn, and Facebook, and sign-up for our blog digest. Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit www.rcmalternatives.com/disclaimer

Is trend following too big? Can managed futures do it without the bond tailwind they’ve had for 30 years? Does globalization take away diversification? We’re debunking these trend following myths/truths (?) in today’s podcast – and today’s guest is ideal to take us through the ins-and-outs of these trend following theories. We’re joined by Kathryn Kaminski, PHD, CAIA, and Chief Research Strategist & Portfolio Manager at AlphaSimplex who has written the literal book and research papers on these theories and more. We’re also talking with Kathryn about AlphaSimplex, COVID puppies, the Nashville predators, diversifying across trends,  Dr. Andrew Lo, research papers & books, pure risk premium, crisis alpha, trend following “doesn’t work” theories, alternative data, being an MIT professor, homemade Swedish meatballs, risk/volatility targeting, and being an alternatives person in a stock town. 00:00-01:43 – Intro 01:44-13:18 = An Impressive Background with a touch of Sweden 13:19-35:03 = Alpha Simplex, Trend Models, & Crisis Alpha 35:04-53:19 = Debunking Trend Following’s Dead & Inflation Environments 53:20- 01:09:51 = Risk Targeting & 2020: A year in review 01:09:52-01:13:29 = Favorites Follow along with Katy on LinkedInand check out the AlphaSimplex website. And last but not least, don't forget to subscribe to The Derivative, and follow us on Twitter, or LinkedIn, and Facebook, and sign-up for our blog digest. Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit www.rcmalternatives.com/disclaimer

Today’s pod is all about word play playing into alternative investment. How does Jam Croissant relate to Cem Karsan? What about Vanna Charm and options definitions? Or the forever popular “there’s no such thing as a free lunch” evolving to “nothing is ever risk free”? To get together the definitions, explanations, and educated facts on all these nuances, we have FinTwit VIP & Founder and Senior Managing Partner of Aegea Capital Management, Cem Karsan. On top of alternative investment word witticism we’re also talking with Cem about how to actually pronounce Cem Karsan starting out as a market maker, Hagia Sophia, vanna informing trend following, buying options, twitter debates, Cem’s favorite jam & croissant, active to passive moves, the election pushing October, November, and December higher, how nothing is ever risk free, winner takes all mentality for market makers, market down/vol down market up/vol up, volatility retail call buying growth versus value, and all of the Greek/options definitions. Follow along with Cem on Twitter (@jam_croissant) and LinkedIn and check out Aegea Capital Management’swebsite. Chapters: 00:00-01:50 = Intro 01:51-14:04 =  A Globetrotting Background and the road to Aegea 14:05-30:06 = Market Makers Business Models 30:07-41:22 = Delta, Gamma, Vega, Vanna, Charm 41:23-52:55 = Playing the Players, Loving the Game 52:56-1:00:22 = Talking Aegea Capital & Getting an Edge 1:00:23-1:16:25 = Momentum vs Value, ProfPlum vs Jam 1:16:26-1:27:04 = Vol Surface & the Election 1:27:05-1:32:24 = Favorites And last but not least, don't forget to subscribe to The Derivative, and follow us on Twitter, or LinkedIn, and Facebook, and sign-up for our blog digest. Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit www.rcmalternatives.com/disclaimer

With storms named Gamma and Delta making their way to US shores – we really couldn’t have timed this release better from a hurricane-content-meets-alts-investment podcast; it’s the: perfect storm (buh-dum-ch). Today’s guest is creator of Weather Underground and the Cat 6 blog, a person who has flown through an actual hurricane, and a whiz at modeling weather data in a way that us non-meteorologists can understand – Dr. Jeff Masters. In today’s podcast we’re talking with Jeff about hedging commodities based on storms, water futures contracts, the Cat 6 blog, historical context of extreme weather events, the transformation of weather modeling, heat output dissipating from WFH, fat tails based on 1-in-100-year events, economic fragility around climate change, hurricane Hugo, weather data inputs that matter, starting weather underground, Jeff’s upcoming book Eye of the Superstorm, hedge fund world catastrophe bonds, Jeff’s most dangerous storm experience, and the impact of COVID on weather modeling. Follow along with Jeff and subscribe to his content at Yale Climate Connections. And last but not least, don't forget to subscribe to The Derivative, and follow us on Twitter, or LinkedIn, and Facebook, and sign-up for our blog digest. Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit www.rcmalternatives.com/disclaimer Chapters: 00:00-01:29 = Intro 01:30-20:35 = Background, “The Final Flight”, & Weather Underground 20:36-32:19 = Building Weather Models 32:20-57:35 = Storm Financial Impacts, Catastrophic Bonds & Fat Tails ( It’s a complex system) 57:36-1:04:10 = Water Shortages & What We Need to Do 1:04:11-1:14:02 = Favorites

If men are from Mars and women from Venus, it often feels like stock/bond investors are from Earth and us Alternative Investment folks are from Vulcan.  We’re digging in with the Bull and Baird blog’s author and Baird market analyst Michael Antonelli to hear how the earthlings (aka wealth management clients) actually think about investments, direct from the guy who is serving up what a whole bunch of them read week in and week out. How is he explaining this crazy investment world to them? In this episode we’re talking about appetite for alts investments, fee-based advisors, institutional equity trading, Culver’s custard, Patagonia vests, Star Wars fan-boying, the world breaking, portfolio diversification, wealth management, Robinhood & FANG driving gamma, what the rest of 2020 looks like, Wisconsin badgers,  Baird in retail trading, “golden age” of options trading, gamifying retail trading, if bonds are a flight to safety, investor patterns, election volatility, pelotons, Milwaukee’s best brewery, & starting a blog & popular Twitter handle. Chapters: 00:00-1:41 = Intro 01:42-10:30 = Background, Blog & Baird 10:31-25:09 = Investments & the World Today 25:10-36:48 = Passive vs Active 36:49-49:48 = Fee Based Models & Talking Retail Traders of Robinhood 49:49-01:01:29 = The Rest of 2020, the Election & Moving into 2021 01:01:30-01:10:40 = Favorites Follow along with Michael on Twitter and LinkedIn, and subscribe to his blog Bull & Baird. & of course we said we’d provide Joe Biden’s ice cream/custard clip here. And last but not least, don't forget to subscribe to The Derivative, and follow us on Twitter, or LinkedIn, and Facebook, and sign-up for our blog digest. Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit www.rcmalternatives.com/disclaimer

We’re joined by option guru and author of ‘The Second Leg Down’ in this episode to talk through the real-time test of market crashes and volatility dynamics we’ve witnessed since February. Is our guest’s theory on volatility sequencing proving its worth in this environment of bigger VIX spikes, oil going negative, and retail trader flow? Hari Krishnan has all the insight on how to survive during volatile periods. Our conversation with Hari also includes: hobby jogging marathoning, basic income options trading checks, gamma driving prices, San Sebastian, selling unlimited retail, the gamma phenomenon, window dressing/skew/& monetization inside Hari’s strategies, Hari Krishnan cult movement, the new effects of VIX spikes, a broken fly, chaos theory,  panic options trading, if we actually saw a second leg, option selling accessibility for everyone, the temptation of selling options, hedge funds bailing on office real estate, fractals, and market crisis in stages rather than single events. Chapters: 00:00-02:01 = Intro 02:02-17:24 = Background 17:25-36:34 = The Rotation of Hedges 36:35-54:13 = Real-time Thesis Test & Broken Fly’s 54:14-1:07:44 = Is This the Golden Age of Options? 1:07:45-1:12:45 = Favorites Follow along with Hari on the SCT Capital Management website & LinkedIn, and read his book Second Leg Down. And last but not least, don't forget to subscribe to The Derivative, and follow us on Twitter, or LinkedIn, and Facebook, and sign-up for our blog digest. Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit www.rcmalternatives.com/disclaimer

The “bar” we walk into in this episode is one that specializes in blending the unique flavors of beta and alpha, and our mixologists are Victor Canto, Chief Economist of Cadhina & Co, and Donn Stobierski & Jim Kleinops, the Founders and Managing Members at Black Bear Capital Advisors joining us to talk about convexity and rebounds, and adding equity to global macro. Today’s podcast delves into the Dominican Republic, the secret sauce behind how the tail works, the ability to stick with your beta, convexity risk profiles, Paso Fino horses, diversifiable risk, nimble strats taking advantage of regulations, US bonds going negative, modeling based on the election, a world defined by liquid assets, commodity trend inflation hedge, the poor man’s tail risk, the Boilermakers, volatility-based weighting, and the cost of risk mitigation. Chapters: 00:00-01:39 = Intro 01:40-14:39 = Background 14:40-34:00 = A Unique Investment Strategy 34:01-49:01 = What's responsible for the movement? 49:02-1:02:47 = The upcoming election & Sizing Volatility 1:02:48-1:10:05 = Favorites Follow along with our guests: Donn      Stobierski on LinkedIn,      Jim      Kleinops on LinkedIn, and Black Bear Capital on their website. Victor      Canto on Linkedin,      check out his book Cocktail      Economics, and connect with Cadhina      & Co. And last but not least, don't forget to subscribe to The Derivative, and follow us on Twitter, or LinkedIn, and Facebook, and sign-up for our blog digest. Disclaimer: This podcast is provided for informational purposes only and should not be relied upon as legal, business, or tax advice. All opinions expressed by podcast participants are solely their own opinions and do not necessarily reflect the opinions of RCM Alternatives, their affiliates, or companies featured. Due to industry regulations, participants on this podcast are instructed not to make specific trade recommendations, nor reference past or potential profits. And listeners are reminded that managed futures, commodity trading, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors. For more information, visit www.rcmalternatives.com/disclaimer