Odd Lots - A Volatility Arbitrage Trader On What Markets Are Saying Right Now

Episode Date: October 19, 2020

It's been an extraordinary year for traders of volatility. We had the crisis, we had this incredible surge in retail call options buying, and we have the election coming up. On this episode, we speak with Kris Sidial, a co-founder and vice president at The Ambrus Group, to discuss volatility arbitrage trading in this extraordinary environment.See omnystudio.com/listener for privacy information.

I'm June Grasso, inviting you to join me for the Bloomberg Law podcast. Every weekday, we help you make sense of the legal stories that shape the nation and the world. Listen for complete analysis of the biggest court cases, the latest actions from Congress and regulators, and the legal moves driving the markets, from corporate law to constitutional law, and from state courts to the Supreme Court. At Bloomberg Law, we go beyond the day's headlines. We speak with top attorneys, judges, scholars and policy experts to break down what the rulings really mean. We do this every weekday,

then bring you the best conversations in our daily podcast. Search for Bloomberg Law on YouTube, Apple, Spotify, or anywhere else you listen. On the East Coast, listen as you start your day, and on the West Coast, catch up in the evening. That's the Bloomberg Law podcast with me, June Grosso. Subscribe today wherever you get your podcasts. Hello and welcome. to another episode of the Oddlots podcast. I'm Tracy Allaway. And I'm Joe Wisenthal. Joe. Yes. Did you know that the VIX futures curve? This is super dramatic. It's not that interesting. Did you know that the VIX futures curve has been inverted or kind of inverted for,

I think like six months now, basically since February? I didn't realize it was then, but, or I didn't realize it had been six months. So basically, that means that investors are hedging again, just higher volatility out in the future than they are right now or the other way around? The other way around. So it means people are paying more for volatility protection in the near term than they are in the future. But that's unusual, or at least it's counter to how the VIX curve normally looks. Normally the VIX curve is upward sloping because there's more uncertainty further out into the future, and so you pay more for that volatility insurance. So it kind of unusual to have the VIX curve downward sloping for this long. And I guess it's one of

those things that tells you that we're in an interesting place when it comes to markets at the moment. Yeah, I mean, it makes sense that people are paying up more for short-term hedging right now, because we obviously are just in extraordinary times. You know, you look out a little way, one year, two years, you could sort of envision a return to normal. But it feels like we're in a period where anything could happen tomorrow, whether it's policy, whether it's related to the virus, et cetera. And so, yes, sort of intuitive that people want hedges in the here and now. Yeah. And of course, the big event risk on. But can I say, can I say something, though? Go on. No, this is something that's always bothered me. And maybe we'll get into this with our guest

today. But I don't understand why it's not always like that because I understand that most of the time people want to pay out for some protection because the future seems like less certain than the present. So I get that in theory. But on the other hand, one of the central like sort of like dogmas of finance is that, you know, over the long term, things go up. The economy improves. Stocks go up, et cetera. So it always seems to be like it should actually be the other way around where it's like in the short term, anything can happen, but in the long term, things are smooth. So I've never really understood the premise of why VIX futures curves slope upward in the first place. But anyway, we can get into that later.

Yeah. I mean, there are dozens and dozens of exchange traded products whose very existence is predicated on the VIX curve, sloping upwards in normal times. But yes, we should we should ask the question, I guess. All right. Well, you've already sort of given it away. But in this episode, we're going to be talking about the current volatility regime. And I was about to mention that there is a very big event risk coming up on the horizon, which is the U.S. elections. And we've seen a lot of talk about volatility hedging ahead of that. We're going to get into that. And we're also going to talk about some of the longer term changes in volatility market structure, including maybe even why the VIX futures curve is normally upward sloping.

Now, I'm super excited about this one. I mean, it's obviously been an extraordinary year. I think due to the rise of these sort of discrete events, whether it's the virus itself, the big thing that's coming up on November 3rd of this year, which could be produced an extraordinary amount of uncertainty. There's been so much interest in what volatility futures or VICT futures curves on all sorts of asset classes are sort of anticipating on a how wild things could get. We also, as we spoke about with Ben Eifford a few weeks ago, there's the emergence of this whole class of sort of retail derivatives buyers, call options buyers, also sort of breaking historical patterns potentially in terms of how hedging markets look. So this is an extraordinary rich topic to dive into. And although we've hit it in some ways in the past, it doesn't feel like we can never really talk about it enough. Yeah, I totally agree. So, Our guest for this particular episode is Chris Sidial.

He's the co-CIO over at Ambrose Group, basically a volatility arbitrage trader. And he's been in that particular space for, well, many years now. So the perfect person to talk to us about the current volatility trading regime. Chris, welcome to odd lots. Hey, good morning. Thank you for having me. So I guess to begin with, you know, Joe asked that question about why the VIX curve is normally upward sloping. Can you maybe explain to us what you've seen over the past few

months in terms of how the market is pricing volatility and what's changed? Why is the VIX curve downward sloping? What are you saying in terms of hedging demand and things like that? Right. So it's very easy to tell that everybody is fixated on December 12. Right. And it's for good reason too, right? You have the potential resurgence of the coronavirus. You have the election time volatility. You have the potential for corporate earnings

lagging. Thanks for reporting this week. So that's pretty big, especially because of everything that's been taking place in trading on the banking side. So everybody has been fixated on December of all and there has been a constant bid.

Even back in late August, we've seen that coalition break between Vixen's spot. And, you know, people were watching that. That was a little bit supply and demand driven. We understand that there was a big player in the market that helped propel that due to some of the dealer, gamma hedging, etc., etc. I could go on for hours about that one. I think people have a concern about the upcoming catalyst and we're seeing across the scope, pre-hedging, that's... taking place, you know, not only with some of the larger players, but you're seeing it with

the smaller guys, too, with some of the, you know, registered advisors, you know, they're basically instructing their clients to, you know, go out, make sure you know, protect yourself. So it's been a constant bid in balls at that level. You know, I've been tweeting this is that when the term structure is so elevated, like what we see when Val is so bid up, it's very difficult to get that added convexity in the move. And what I mean is that when VAL is so pre-bid, it's somewhat priced in. So people are kind of anticipating this. People are pre-hedged.

The move that you need to get VIX to like a 70 or 80, it has to be real panic and real fair in the market. And you won't get that if guys are pre-haged, right? Because let's think about it in the most basic conceptual way. If you have a book, right, let's just say you're running a million dollar book, right, and you have your hedges on and the market is down 7%, 10%, right? You're pre-haged. So you're not going to go and rush to the exit door, right, to sell off your positions because you already have your hedge. And when you have that across the entire landscape, right, it becomes much more difficult to get involved to really get going. It's like that example of like what causes the VIX to really suck as if you have a whole bunch of people in the room and they're all trying to get to the exit door at the same time. But in this case, right? No, so I mean, just sort of like to, I mean, if you just sort of think about over the last several months, March was sort of like the mother of all panics, probably one of the biggest panics in the history of Wall Street. And since then, it's just been nothing but fear of a second wave, fear of ongoing economic, sort of fallout, fear of a policy mistake. fear of the election, everything going wrong, massive reason to hedge and stay out of the market. But as such, it's hard to get actual intense selling when essentially so many people have already been fearful.

Right, right. So it's that pre-hedge position that will disable vault from going through the roof. Right. It needs to be somewhat of a fair factor. And I was saying this, too, that in order for Vol to really get going in December, you need a fresh catalyst. Right. So the election time just isn't enough to really get Vol to go through the rule of how people are anticipating. And you are seeing that in the divergence between VVIX and VIX, right, I-X is Volub.

And what we're seeing is the market is not really fearful. You're seeing a divergence between the two, and it's showing us that, yeah, guys are pre-hedge, but there isn't a massive rush to pre-hage. Don't get me wrong, right? There is a potential for a fresh catalyst, right? Like, granted, a Biden election, right? Now, you have to think, you have to immediately shift your focus into the trade war, right, if a Biden election takes place. Because what if we wake up the next day, right? We find out Joe Biden is the president.

And one week later, we hear China's like, okay, guys, well, sorry, you know, we need to reassess this trade deal that we were talking about. Right. So a fresh new catalyst like that or, you know, something just completely out of the woodwork could be enough to get the market to get going. But it's very difficult to get volatility to really move like a VIX, a VIX moves to 70 or 80 on things that are already pre-priced. I just don't think that the velocity of the move will be there without a new catalyst that isn't already predetermined. So one of the questions I have based on that is if everyone is pretty well hedged going into the presidential elections, who is actually selling Vol exposure at the moment? So that's a really good question. there are people that are out there that are taking advantage of this and they're looking to sell ball we actually know a couple institutional guys who are trying to take advantage of this but you know they

think they are expressing their views in a more sophisticated way where they are hedged off but i would not suggest this to the average retail guy because there are a lot of complexities that go when to do this. With the recent correlation break in Spot and VIX, it's very difficult to determine what the market is going to do. You can't have too much conviction outside because you could have a situation where Spot is down and Ball is down, all right? Or you could have an inverse of that situation. So you can't be too sure of what exactly is going to take place. Historically and statistically, right now, I'm very confident enough to say that the trade is short volatility, right?

Statistically and historically. There are no numbers that I think an individual could pull up that can lead me to say that the trade is not short ball. However, as a trader and, you know, as a risk manager, you look at this from a different standpoint, right? Because you look at this and you say, okay, the data makes sense. The numbers line up, but there's been so much variability in 2020, do we really want to take this shot?

Right. So there are a million other trades out there that we could take. We're not expressing the view with so much conviction. Right. So, you know, we could be short a little bit of all in the book to try to capture that. But the risk to reward from what we've seen in 2020, I mean, 2020 has just been one of those years where I feel like, I call it the curtosis here. because everything that is like a 2 delta, a 5 delta as an under is just has been hitting. Like we've been seeing it left and right. And you want to talk about just life in general, right? Like God rest his soul, Kobe Bryant died from a helicopter crash, right? You're just thinking about every little thing. You want to talk about the election. I'm a fairly young guy, but I have not seen a year where there's been so much variability.

So with everything taking place, it's very difficult. for me to say, okay, I'm just going to fixate on the numbers. And specifically, I'm just going to say, like, you know, I'm just going to capture the VRP and shortfall here because the risk of a reward just doesn't really pan out. Hi, I'm PJ Vote. My podcast Search Engine has a new two-part series for you. Of all the new technologies coming out of AI,

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Listen to search engine wherever you get your podcasts. I'm really curious about these sort of other opportunities you identify. So, of course, okay, they say the statistics line up and say, you should probably be short vol because the sort of realized volatility going into the election is probably not going to be as high as the hedgers are positioned for and statistics suggest there's probably some money to be made there and taking advantage of all the fear. What are the other things that you look for in terms of opportunities that aren't the sort of simple directional bets on one way or another up or down

in volatility? Yeah, so we look for a little bit of regression in some relative value things. I think earnings this season is really, really prominent. I think it's going to, forward guidance is going to really paint the picture for us. And I think reality will set in a little bit because I'm anticipating a little bit of a slowdown in corporate earnings this cycle. So there are ways to capture that spread between some of the single names in certain sectors. right so we don't necessarily need to be meagish focused on you know vix up you know we look to express some of our views in some of the sectors with single names and then also the ETFs right so for example if we're looking at a you know the cues to IWM you know maybe we think the

cues are trading relatively rich and IWM is trading relatively cheap from from a ball standpoint right, maybe 30-day implied ball, or, you know, we like to focus on the wings. So we'll be looking at how is pertosis trading, or is the 5 delta underputs or five delta under calls trading relatively cheap or expensive. So I think this earning cycle brings up an opportunity for a lot of dispersion. And I think you'll see disparity in a few different sectors. So I think people could look to focus on that. mean, you know, from just eliminating, okay, like, VAL itself, this election time is very important

in relation to sectors, right? Think about how important the oil sector is. Think about how important health care sector is. Think about how important the energy. Like, those sectors are heavily reliant on who will be the winner of this election, right? Because it's night and day for the turnout for that. So, you know, I think investors could and should focus on some other areas besides, oh, yeah, I think, you know, volatility is going to spike. I think if you look at the volatility on individual names and certain sectors, it could present a little bit more opportunity there than, oh, yeah, I'm just going to play like a calendar spread and, you know, sell January balls and buy December balls or vice versa.

I wanted to zoom out a little bit and sort of move away from the near-term concerns about potential fat-tails and the upcoming election and talk about volatility trading over the past few years. So one thing that we hear a lot is that central banks have artificially suppressed volatility through their various unconventional monetary policies. But we also hear from various guests, you know, Ben Ivert's a good example of that, or Chris Cole from Artemis. We also hear that Wall Street or traders and the sort of ecosystem around volatility trading has actually, in effect, also had a hand in suppressing volatility as well. I'm just curious to get your take on that. If you look at Ball now, how suppressed would you say it actually is? and what would you attribute that to? Is it central banks or is it the way big ballplayers are actually dealing in the space at the moment?

First of all, shout out to Ben Knifer. Ben, Ben, in such a good dude. I love that. But, yeah, so volatility is absolutely suppressed, but we're not seeing the same level of suppression as we were seeing pre the COVID. because a lot of these short ball funds and a lot of the funds that just focused on selling, you know, like a 10 delta put or, you know, 25 delta put or whatnot, those guys are kind of blown out.

Right. So you're not really seeing the, the level of suppression that we were seeing pre-COVID. However, I should say that this is on a relative level because it's still a very heavy amount of volatility suppression that's going out there. Central banks are absolutely suppressing volatility. And I think the way how global rates are actually set up right now, it is, it's a big problem. I mean, you know, you have to look at it like this. With global rates being so low, if you are an allocator, you are just, who's just fixated on generating a return.

What can you do in this market? Are you going to go buy corporate bonds where you have to take on the same sort of default risk? as you would with in equity, or are you going to go buy a treasury where you're going to be yielding like 0%? Right. It comes to a point in time when you're looking at the menu, you're saying yourself, I might as well just be invested in equity, right? So with global rates being so low, it forces new players who aren't really in the market to

now move into this new spectrum, right? And with that, you also have this interesting dynamic. taking place with structure products just blowing up, right? You have, I mean, I was on the exotic desk at BMO, and I could tell you for a fact, you know, January before the COVID situation was an amazing month. People were eating up structured products. The appetite for it is huge, right? So you think about everybody who is in the investing world now, right? They want a piece of, they want a little bit of everything compiled into one. All right. So they want a little bit of healthcare, they want a little bit of tech, they want a little bit of energy, and they want it all

in one basket, hence the growth of ETF product. But what we are seeing is this dynamic is actually taking away from market prep. So if you were to look at the main components in the spy and the Q's, right, the components that are in the two are the same thing, right? It's basically the exact same thing. So what this is telling you is that the market is being driven on no breadth. So as much as people want to diversify and they're trying to diversify, their portfolio is credited on the large name. So with the growth of structured products, with the low global rates and the force rush to equities, and then toss in passive investing with the millennial group, they're just like, oh, yeah, I want to be invested. in an algo that's going to return, you know, a guarantee 12% a year.

Whereas the reality behind that is it's not as easy as that. And, you know, people are just very open to putting their money into these type of passive products. So you mix that in now with a big transfer of wealth that comes with the actual market buying power. Right. So as a millennial myself, I have friends in the business and in different industries who are now becoming seasoned professional where, you know, they're making a fairly good salary.

And these people are now able to put their money invest in the stock market, right? So the decision making has now shifted from the boomers to the millennials, right? So the buying power, and we're seeing that, right, because people complain so much about, you know, the Robin Hudders and, you know, or some of the market flow that comes from there. Right. but it's not only the Robin Hood is, right? It's the millennials that are a little more open to taking risk. Myself and my team, we went through data on this little phenomenon and, you know, some of the market psychology and sentiment of the younger group.

Right. So with that taking place, right, all those things mixing into one, right? You have this added volatility, right, where you should and you could definitely have these left-tail offense take place more frequently than you were seeing, you know, in, you know, the 90s or the 80s. So, you know, you mentioned having been on the cell side, on the desk at BMO. And, of course, you know, again, talking about our conversation with Ben a few weeks ago, what did you learn from that experience that you've taken over to the by side? And how does that, sort of like, what did that,

experience teach you in terms of the opportunities that arise due to the positioning of the sell side of the dealers and so forth, how does that help you think about and spot opportunity? I was actually speaking to, I was actually at my old university and I was speaking two weeks ago and I was speaking to a younger kid and he was telling me that he trades options. So I'm just asking him, you know, some basic questions, you know, okay, how do you express your view and, you know, what is it that you look for? Right. So this just, gentleman had no idea what Delta Vega Gamma was, which is okay, right? He's a college student. We go through it. We all learn. But the appetite and the willingness to go and trade derivatives

is at the highest it's ever been, right? Everybody wants a point of leverage. Everybody wants to be invested in something that could generate something with a convexity component. Right. So people are very fixated on office rating, even though they have no idea what they're doing. So the growth is tremendous, right? And now you add in the fact that dealers need to carry a matchbook, which means that they really just need to hedge off their risk. And you add that in and that leads to excessive dealer gamma hedging, right? And that leads to more emphatic swings in the market. And, you know, you asked me, what did I learn at BMO? You know, I learned a tremendous amount under those guys.

I'm truly grateful to have experienced the, or had the opportunity to help manage a book of that size and go through the day-to-day and understand the moving components of all the complexities and a book of that size with those type of products, right? Because you have a million moving pieces. So I think understanding how to manage risk from a large book like that, with all the moving pieces, I think really translated well to how we look at risk here at Ambris. But one thing that really opened my eyes was a situation that took place.

And I want to say late February or early March. But it was really an eye opener to me that the book moved in a particular way that we didn't anticipate. Right. And although obviously, you know, I understood and knew the intricacies of, dealer gamma hedging, right? And obviously on a day-to-day base, I went through that process, right? When we hedged off our book, you know, at the beginning of the morning or at the end of the night, because that was our job. And when the exotic success, the job was just don't lose money for the bank, right? So you're basically there as a protection trader. So I remember the market

was tanking and we got the call from the heads up. And my boss at the time literally just, I sat one row away from him. I remember him just saying, like, okay, we need to hedge everything. And I'm looking at the positions. I'm looking at like our Vegas moving, our Gamma's moving. I'm saying to myself like, oh, man, I don't know if this is really the right move. But he just said he's like, we need to hedge everything. We got the call up.

Like it does not matter what the price is. We have to hedge it. Right. So what that meant for us is that we now, had to go out into the open market and sell SBX features and basically buy SPX Qaeda. So synthetically, what does that do? Right? That drives the price of the market down and that drives the price of fixed up.

During that time, you know, it was an eye opener because us as a large bank, you know, we had to basically come in with a ton of size and do this when the market was already getting hammered. And I thought to myself, this is taking place across the street. And it really sank into me that this is much more severe than people give it credit. Because obviously, I understood the ramifications of this because, you know, I traded on the by side before there. And, you know, I understand how market microstructure works. But when you see it in real time and you see how you're moving the market with so much size and there's other guys that are doing the exact same thing and you have forced liquidation thing you can place. It kind of really just clicks to you and you're like,

oh my gosh, like that was literally just us. We just dropped the market or, you know, us and, you know, two of the clients really just move the market. It emphasizes on what we try to do at Ambrose, right? We are fixated on capturing those left and right tail of them, right? So we have a little. leave that with excessive volatility suppression, and we will continue to see this, right? The market will get back into a point of complacency, and we will have those short volatility funds come back, and we'll have guys that are basically selling, you know, variants left and right. So it's just about wasting for the complacency to set in, right? Because when March of 2020 took place, everybody had that fresh in their mind. So everybody now they want to

manage risk. Right now they want to focus on hedging off the book. Right, but there will come a point in time where the market is just going up and people are going to be like, oh, you know, I don't escape the hedge. I don't need to, why do this? You know, it's taking away 3% yield for me for a year, you know, I don't need this anymore. That's when you will have more

of these emphasized moves take place where you see a move like that. You know, you have a right till event or a left hill event. And we believe that the way how we set our positioning, we're going to be able to capture those type of move because as the market microstructure continues to adapt, we believe that these moves

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business app, or listen to the podcast. That's Bloomberg this weekend. Saturdays and Sundays starting at 7 a.m. Eastern. Make us part of your weekend routine on Bloomberg television, radio, and wherever you get your podcasts. So this is something I wanted to ask about, actually, when you were telling the story about how everyone on the street was kind of doing the same thing all at once and hedging their own volatility exposure in similar ways. What are your options when you're doing that kind of hedging? is there an opportunity to do something different to what everyone else is doing? Or by the nature of the exposure, you're sort of forced to, you know, buy or sell spy futures or VIX futures or something like that?

How much freedom isn't the right word? How much creativity do you have in managing those hedges? Well, you know, you could try to get a little bit cute and creative, but at the end of the day, it's going to lead to one thing, right? If you are long, you need to cut down that delta, right? So at the end of the day, you're going to need to be negative delta. So no matter how you want to flip it, if you want to say, okay, you know, I'm going to try to sell something that I believe is relatively cheaper that carries the heavier beta. Sure. But at the end of the day, whether you're trying to go through the window or go through the front door or the back door, you've got to get out the house. All right. So,

it's literally the exact same thing. If you want to express it and jump through the attic, you can do that. But at the end of the day, you're not going to be able to escape the situation that you're in. And that's basically, okay, I'm at a point where I need to minimize risk. Right. So I heard a, I think it was actually Chris Cole. Chris Cole said this on a podcast. And he was basically saying, like, when the market was tanking,

we had our phones ringing off the hook. and, you know, everybody wants to hedge at that point. But you basically saying, like, look, there's nothing I can do for you at this point. I think you want to try to hedge off your book now when the market is, you know, 13%, 15% down. Like, the time to hedge was beforehand, right? You should have been calling those guys beforehand. So the game of volatility is a psychological game, right? Because people look at this and they say, eh, you know, I don't really need this right now.

Why am I going to lose 5% off of my portfolio paying for this? you know, like things are fine, right? But those are the moments where you really need it. Because, yeah, you may lose 5% in your book paying for volatility, but it's going to offset those losses where you're going to lose 35%, you know, 40%. And in some situation, guys, if you were positioned well enough, like we did, you know, we did a shock test to see where our positioning would be in March. And it was very easy to see that.

with a small allocation, not only would you have recouped your losses on, and based on the allocation that we believe, and I won't go into, like, you know, discussing that on the podcast, but you would have not only recouped your losses, but you would have made money. So, you know, obviously contingent on the allocation sides and whatnot, but there is a situation where this thing is not only served as a protective base, but it could also make money for you. And, you know, even if you were just a blind guy that just decided, not buying volatility, pre-February March, you made money. If you were long volatility, it was very difficult for you not to make money.

It's hard to try to express that view and try to get cute and creative about it because at the end of the day, your focus is basically on one thing, and that's really just to mitigate risk. I want to go back to the question that I asked right at the beginning, which is why do Vol curve slope upwards? And, I mean, I understand that that's how it always is, But, you know, it seems to me that if you wanted to ask, like, oh, what's the stock market going to do over the next week or the next month or the next two years, the next five years, it's probably going to go up based on, I'm not talking about the future, but I mean, historically speaking, that was just the case that over the long term. And this is like a fundamental axiom of investing.

This is like over the long term, hold for the long term stocks usually go up, et cetera. And so if this is one of the fundamental ideas in investing that the short term is noise and the long term is a steady gain, which is what most asset managers sort of assume, why do people pay more for protection over the long term than the short term? Yeah, that's a really good philosophical question. I think it's because we don't have and we can't really project an idea of how detrimental the ramifications will be. And it's one of those situations where when the avalan starts to take place, most likely it's the beginning of what will be a bigger ball. So it's like that snowball effect, and it's very hard to try to price that out. You know, if we were in a situation where guys could buy cheap ball on forward projections, I think from a philosophical standpoint, guys would do it. But, you know, I think people who don't really trade volatility didn't know.

that when the market tanked in February and March, the longer dated stuff on the term structure didn't really move too much, right? If you look at some of the, I mean, if you want to just talk about like an exotic note, or let's just say in general, like two years out, the vault on that didn't really move

as much as people anticipated, right? But the longer dated, the real longer dated ball stuff, like, you know, you don't know, five years, three years, three years, that type of stuff doesn't really get going when Paul is selling like that. You know, so there is that misconception that people have where, you know, they think, like,

well, you know, five years, five year of all or whatever, it's probably spike. So, you know, I'm just going to sell it. Well, it was that easy. I think everybody would just set up business and just do that. But, yeah, from a philosophical standpoint, I could see why all the projecting is tough. Right. And, I mean, you think about all the bright minds in the market, like, we have so many intelligent guys and nobody can

power project volatility. There's a big assumption factor and there's a lot of variance and a ton of variability in those type of assumptions and that type of modeling. So with all the bright minds that this world has produced, nobody has been able

to accurately forecast volatility. You could have maybe a sense and you know you could nick it one or two times but actively forecasting volatility is something that I just don't think that humans can do right now. Well, Chris, that was a really engaging discussion.

And it's always good to dive into the volatility space, especially now when we have interesting things going on ahead of the election. And I guess the good news is we won't have to wait that long to see how it all shakes out. So just until November or December, I guess. Thanks so much for coming on. Thanks, Chris. That was great. Thank you, guys. So, Joe, I always enjoy it when we talk about the volatility trading space.

And it's good to get a sort of market practitioner like Chris, who's in the weeds and can really explain what's going on when we see a gamma hedging event in markets. Yeah, there's so many interesting things to think about. I mean, one is, you know, again, talking to Chris, talking to Ben, think about all these retail traders who have come in to the market. And in multiple ways, I mean, some, of course, going crazy with call buying. Also, I thought it was interesting Chris mentioning the rise of like the sort of like passive, like, I'm just getting, you know, buy the same amount of stock every week on an app like Acorn or whatever. How much of the opportunity sort of comes down to like market structure things as opposed to taking some directional view like, oh, I think Biden is going to win and therefore X. Yeah, absolutely. And I guess the big change that we've seen in the market in recent years is that volatility trading has sort of exploded into its own industry and with it that's had the impact on dealers. And then what the dealers are doing is having an impact on the broader market, but also volatility expectations as well. So it turns into this sort of self-fulfilling isn't the right word, but I guess self-fueling cycle.

of volatility trading. So like suppression begets further suppression, basically. Yes. And, you know, look, I still don't feel like I understand why volatility curves slope upward. It doesn't make any sense to me. Like the few, the short term is weird. And we don't know what's going to happen tomorrow, but probably the long term will be kind of boring, right? I don't know. I feel like the long term, I mean, look, I think 2020 has kind of jaded me about what can happen in a single year, let alone over the course of a decade. Any tomorrow could be very weird. We know that. What about 10 years from tomorrow?

Well, 10 years from tomorrow, every single advisor we would ever talk to would say, yeah, stocks will probably be higher. Yeah, but you don't know what. This is like, but you don't know what happens in the meantime. Who cares? And no, I get it. I'm still like on the hunt for like the totally satisfying answer about how the investment industry's view could be stocks generally go up, ignore the short-term noise, but also we're going to pay more for long-term hedges than we do short-term hedges. Hey, look, I think the moral of this conversation or the big takeaway is that you're going to be

selling some very, very cheap volatility exposure 10 years in the future. Everyone should come to you for their long-term hedging needs. Yeah, I'm putting a call out right now. No, I'm not. But I guess, you know, thinking about it that way, it's like, sure, I can say that that I'll like would be a seller of long term ball but do I really want to be on the hook for it? Maybe that's the issue. I just don't want to uh I just don't want to take it on my book. Yeah, I think it's going to end up being something like the carrying cost over that course of time, isn't it? But okay, well, on that note, again, everyone by vol exposure from Joe,

he's offering. But in the meantime, this has been another episode of the Odd Lots podcast. I'm Tracy Alouye. You can follow me on Twitter at Tracy Alouye. And I'm Joe Wisenthal. You can follow me on Twitter at the stalwart. Follow our guest on Twitter, Chris Sidial. He's at P-S-S-I-I-I-I-I-I-S-S-D-I-I-S-S-D with three-Eyes. Follow our producer, Laura Carlson at Laura M. Carlson. Follow the Bloomberg head of podcast, Francesca Levy, at Francesca Today. And check out all of our podcasts at Bloomberg under the handle at podcast. Thanks for listening. You can get the news whenever you want it with Bloomberg News Now. I'm Amy Morris.

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