The Derivative

To close out the 2024 season of the Derivative podcast, host Jeff Malec sits down with two friends of the pod, and friends of his - Jason Buck and Zed Francis -  for a wide-ranging discussion on the state of the markets, the unpredictability of macro events, and the importance of understanding underlying structures and dynamics. The conversation begins with an exploration of the unexpected market reactions following the first Trump election (in ‘16), highlighting the challenges of the past, and ends with making sort of, semi- predictions for the year ahead in 2025. The guests delve into the concept of "volatility echoes" and how past events can influence future market reactions. The discussion then shifts to the impact of interest rates, with the guests analyzing the significant moves in the long end of the Treasury curve during the recent election week. They debate the potential implications for asset classes and the role of political influence on market dynamics. Beyond the macro landscape, the podcast also touches on the evolution of option strategies, the rise and fall of "pod shops," and the importance of liquidity and market maker strategies in stabilizing markets. The guests share their insights on navigating the complexities of the financial world. While the core of the conversation focuses on the markets, the episode also features a fun and engaging segment where the hosts and guests engage in a "Mount Rushmore" challenge, sharing their top picks for burgers, dive bars, and fine dining experiences around the world. You found it - the pod that gives you financial insights and culinary recommendations - so bring your appetite for mind and body…this ones’ juicy! SEND IT!

Chapters:

00:00-01:38= Intro

01:39-13:39= Recency Bias and the Volatility of Election Reactions

13:40-25:40= GOLD & the Delicate Balance of Market Resilience / Activist investors & Risk Adjusted returns

25:41-37:29= 2024’s most interesting trades & Stability Breeds Instability

37:30-48:51= Rates, Risks, & Realized Volatility

48:52-01:01:11= Outflows, Podshops & Random bones for the future

01:01:12-01:20:20= Menus & Markets: Mount Rushmores of eateries from “Culinary Experts” & 2025 insight

In this episode, Jeff Malec sits down with David Sun, an entrepreneur, trader, and fund manager with a unique journey into the world of options trading and alternative investments. David shares his unconventional path, starting as a retail trader experimenting with options strategies, particularly selling puts, before transitioning to professional fund management. He discusses the challenges and lessons learned as he navigated various market regimes, including the 2018 and 2020 downturns. The conversation delves into David's systematic approach to options trading, focusing on risk management techniques like stop losses and hedging strategies. He explains his evolution from primarily selling options to incorporating more option buying, as well as his exploration of zero days to expiration (zero DTE) options and the unique risks and considerations involved. David also shares insights into the role of behavioral biases in the markets and how he leverages data-driven research to develop robust trading strategies. He reflects on the increasing accessibility of trading tools and resources, and the valuable contributions of the retail trading community.

Chapters:

00:00-02:08=Intro 02:09-09:21= Engineer to Retail trader to Fund manager – an unconventional path

09:22-18:21= Don’t quit your day job & Option-based fund management

18:22-26:09= Mitigating gamma risk in short-dated options & Focusing on the win rate

26:10-35:47= Exploring behavioral biases and combining systematic & discretionary styles

35:48-45:39= Democratizing trading: Hedging, Volatility, Trend, and Broken butterflies

45:40-57:11= Sharing knowledge and resources: The Trade Busters podcast & bridging the gap

57:12-01:07:18= Naïve to Trends, momentum, edge? & the human behavioral bias

From the episode:

In this episode, Jeff Malec sits down with Peter Polanskyj, Head of Structured Credit at Obra Capital, to delve into the firm's unique approach to investing across the insurance and credit markets. Obra Capital is a $4 billion asset manager with a specialized focus on opportunities at the intersection of insurance and credit. Peter shares insights into the diverse opportunities in this space, which spans longevity investing, reinsurance, structured credit, asset based financing, and more. Peter & Jeff discuss how origination capabilities, structuring expertise, and risk management focus are key to creating value for investors getting into these differentiated markets. During the chat, we also cover the evolving dynamics in the insurance industry, particularly in hurricane ravaged regions like Florida, and the role these kinds of strategies can play in investor portfolios as sources of uncorrelated income and diversification. Time to reinsure your market knowledge – SEND IT!

Chapters:

00:00-02:17= Intro

02:18-16:21= A diverse credit platform: from structured products to specialized lending

16:22-33:28= Leveraging expertise across insurance – taking the stress off

33:29-49:43= Obra’s One-stop-shop and layers upon layers

49:44-01:03:50= Talking terms, specialized credit and insurance investing

01:03:51-01:11:40= The Florida insurance market & adopting to evolving market conditions

01:11:41-01:21:14= Longevity insurance & flexible capital

In this episode, we explore the world of options trading with Martin Vestergaard and Michael Cameron from Carmika Partners. The conversation begins with an in-depth analysis of the volatility spike that occurred in early August, as Vestergaard and Cameron share their insights on the market dynamics and the impact on their trading strategies. The discussion then delves into the growing influence of daily options and the challenges of navigating a highly electronic and technical market. Vestergaard and Cameron provide valuable perspectives on the importance of understanding current market conditions and adapting trading approaches accordingly. Listeners will get an inside look into Carmika’s quantitative approach to options trading, with a focus on modeling implied volatility and skew across the options curve. We also discuss their industry backgrounds, where volatility trading may be heading next, and more. Whether you're an experienced options trader or looking to expand your knowledge, this episode offers a wealth of practical information and thought-provoking perspectives on the complexities in today's options landscape. SEND IT!

Chapters:

00:00-01:38 = Intro

01:39-24:15 = August 24’ Vol spike recap

24:16-38:40 = a Quantitative Approach to Options trading

38:41-50:10= Complexities in Options landscape in 2022

50:11-01:05:43= Experience & Expertise – Backgrounds & Approach

01:05:44-01:13:38= Evolving Options

01:13:39-01:28:37= Navigating Volatility & Skew

01:28:38-01:33:31= Lessons Learned

In this episode of the Derivative podcast, our host Jeff Malec sits down with Tim McGregor and Tom Hession from Riverbend Capital Advisors to dive deep into the world of municipal bonds. The discussion covers the unique inefficiencies and complexities of the $4 trillion muni bond market, which features over 75,000 different issuers across the country. Tim and Tom explain how this fragmented landscape creates opportunities for active management and value capture, even in a low-risk asset class. Throughout, we explore the importance of customized portfolio construction, credit analysis, and structure optimization to generate tax-advantaged income for individual investors. We also touch on the impact of federal policy, interest rates, and political dynamics on the muni market. With over 50 years of combined experience in municipal bonds, the Riverbend team provides valuable insights for anyone looking to understand this often-overlooked corner of the fixed income universe. Listen in, as we venture into uncharted waters with Muni bonds! SEND IT!

Chapters:

01:33-14:25= Navigating the Fragmented and Inefficient Muni Bond Market

14:26-29:15= Complexities in structure, credit & policy

29:16-36:28= Muni Bonds in a changing market: Opportunities & Challenges

36:29-52:37= Election/Fed cuts? The importance of tailoring your clients portfolio

52:38-01:01:00= Experiences with Muni Bonds, covid-sell offs and tax advantages