Volatility Trade - countertrend

misterkel

misterkel

Okay, Christopher Cole (don't know him) posted this report - https://static1.squarespace.com/sta...s_Volatility+and+the+Alchemy+of+Risk_2017.pdf
saying, in effect, volatility is now the most undervalued asset on the planet. The short volatility trade is huge (multi-trillion $$) and the unwind could be catastrophic for the shorts.
Worth reading, but the question is - what is the lowest cost way to place a long-term long volatility bet, implicit or explicit?

What can you buy for 6 months / 1 year that might hold value? Roll it halfway through or something like that?
VXX slowly wastes itself even if vol remains static.

Long-term VIX options are almost unresponsive to short-term vol spikes, so no help there.
 
misterkel said:
Okay, Christopher Cole (don't know him) posted this report - https://static1.squarespace.com/sta...s_Volatility+and+the+Alchemy+of+Risk_2017.pdf
saying, in effect, volatility is now the most undervalued asset on the planet. The short volatility trade is huge (multi-trillion $$) and the unwind could be catastrophic for the shorts.
Worth reading, but the question is - what is the lowest cost way to place a long-term long volatility bet, implicit or explicit?

What can you buy for 6 months / 1 year that might hold value? Roll it halfway through or something like that?
VXX slowly wastes itself even if vol remains static.

Long-term VIX options are almost unresponsive to short-term vol spikes, so no help there.
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It implies to me that you should be buying cheap options and the just wait for the day that volatility explodes.
 
misterkel said:
Okay, Christopher Cole (don't know him) posted this report - https://static1.squarespace.com/sta...s_Volatility+and+the+Alchemy+of+Risk_2017.pdf
saying, in effect, volatility is now the most undervalued asset on the planet. The short volatility trade is huge (multi-trillion $$) and the unwind could be catastrophic for the shorts.
Worth reading, but the question is - what is the lowest cost way to place a long-term long volatility bet, implicit or explicit?

What can you buy for 6 months / 1 year that might hold value? Roll it halfway through or something like that?
VXX slowly wastes itself even if vol remains static.

Long-term VIX options are almost unresponsive to short-term vol spikes, so no help there.
More...

While it's an interesting paper and he's an articulate writer - just be aware he's a perma bull on vol and is incentivized to convince people they need to invest in long vol strategies (like his fund).
 
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Martinghoul said:
It's not a bad write-up and it's very hard to disagree with the author's underlying premise.
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It’s a hard trade. While an increase in volatility from these levels is likely, it’s not guaranteed to be catastrophic. Even if it is, by the time it finally arrives you might bleed so much that you would be completely out of ammo.

I knew a fair number of people who got bearish in the mid-2000s and put on positions. Some made money, but most of them bled out. The ones that benefited the most from the blowup were guys who mostly spoke about it and did nothing (like Roubini).

Somewhere out there might be a relative value trade that will make you long tails while controlling the bleed. I am still looking :(
 
sle said:
It’s a hard trade. While an increase in volatility from these levels is likely, it’s not guaranteed to be catastrophic. Even if it is, by the time it finally arrives you might bleed so much that you would be completely out of ammo.

I knew a fair number of people who got bearish in the mid-2000s and put on positions. Some made money, but most of them bled out. The ones that benefited the most from the blowup were guys who mostly spoke about it and did nothing (like Roubini).

Somewhere out there might be a relative value trade that will make you long tails while controlling the bleed. I am still looking :(
More...

So you saying the best long vol trade is to actually write a book about long vol. Very clever. And true of course. :)
 
Maverick74 said:
https://www.nytimes.com/2017/09/13/business/dealbook/market-volatility.html

Interesting guy. Started his fund in 2012 with a million and now has 200 million. He must be doing something right. Also, I doubt this guy is "sitting" on long vol. He is actively trading it. And by the looks of it, probably doing ok.
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I’ve spoken to them a few times - conceptually, they are running a relative value strategy, so it’s not all long vol. Smart business model. Though I think returns weren’t great, he’s floated by the fact that’s he’s the counter-asset for many portfolios.

There are a few other guy trying to replicate it, from what I recently saw
 
Is there any or some degree of truth that volatility can be manipulated and controlled by
well....you know Citadel, Fed sock puppets , central banks and rally stake holders in general?
I am under the spell to some degree that volatility futures are a small market relative to the size of the aforementioned players and can be sold to reverse a correction in the underlying stock indexes.
I do know my level of understanding , as a point and click stock guy, is enormous and possibly unparalleled but....
Can anyone respond to this tin hat conspiracy theory?
 
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Cole is perpetually long vol in the front of the curve and short vol at the back from what his literature seems to suggest. I can't imagine his fund has been performing that well in 2017 with the unexpected ultra-low volatility.
 
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