The Derivative

By RCM AlternativesBusiness Investing

The Derivative episodes

November 07, 2024 Retail to Institutional: How David Sun Scaled His ODTE Options Strategies
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:
Fooled by Randomness (Book)
The Derivative episode: WTF?! Will 0DTE Cause Gammageddon? With Mike Green and Craig Peterson
Smartless podcast

Follow Along:
Follow along with David on Twitter @TheTradeBuster and also be sure to check out The Trade Busters podcast

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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
1 hr 8 min
October 31, 2024 Blending Insurance and Credit Expertise: How Obra Capital Finds Opportunities in Unique Situations
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
Follow along with on LinkedIn with Peter and Obra Capital, also make sure to check out Obra's website for more information!

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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
1 hr 22 min
October 17, 2024 Carmika Partners Unpack the August Volatility Spike and Complexities of Options Trading
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

Follow along with Carmika Partners on LinkedIn with Martin Vestergaard & Michael Cameron and check out their website at carmikapartners.com for more information!

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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

1 hr 34 min
October 03, 2024 Is there Alpha in boring old Muni-Bonds, with Riverbend Capital
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
Follow along with Riverbend Capital on Twitter @Riverbend_Cap, Tom & Tim on LinkedIn, and check out their website Riverbendcapitaladvisors.com for more information!
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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
1 hr 1 min
August 29, 2024 Trend, Prop, and Being Allergic to Optimization with Bill Gebhardt of 10Dynamics
In todays episode, Jeff Malec sits down with Bill Gebhardt, the founder of 10 Dynamics, to discuss his interesting career journey and the development of his unique systematic trading approach. Bill shares his background, from working on the floor of the CBOE in the early 90s to earning a PhD in finance and transitioning into the energy trading space. He provides insights into the evolution of the commodity markets, including the rise and fall of Enron, and the challenges of maintaining an edge in fundamental trading. The conversation then delves into Bill's transition to systematic trading, sparked by his exposure to a successful systematic team at
his previous firm, Trailstone. This led him to develop the 10 Dynamics model, which is built on 10 core signals that closely mirror Bill's own decision-making process as a trader.
Bill explains his "allergic to optimization" philosophy and the benefits of using multiple time frames to generate positions. He also discusses the importance of risk management, operational efficiency, and adapting to changing market conditions. Throughout the episode, Bill shares his unique perspective on the markets, the role of
human behavior, and the future of systematic trading. This insightful discussion offers valuable lessons for both aspiring and experienced traders looking to navigate the complex world of alternative investments. Buckle up,
because this conversation is about to "send it" into the world of alternative investments.
Chapters:
00:00-01:40= Intro
01:41-4:18= Puddle jumping to across the pond / ski adventures
4:19-14:46= Quants, Derivatives, Energies & Enron: Starting 10Dynamics
14:47-31:55= Prop trader behaviors, philosophy 101, random walk paths & systematic approaches
31:56-43:39=Time frames – why they matter, deploying risk & flat investments
43:40-53:47= Models vs traders, Quant trading, fundamental filtering & never cherry picking
53:48-01:05:09=Mispricing, Alpha decay & Delta hedging

From the episode:
Whitepaper 10Dynamics: “The Freezer” – Automated
Risk control systems for systematic trading
10Dynamics.com
HI HO Silver! Blog post
Follow along with Bill on X (Twitter) @BillGebhardt1 and on LinkedIn.
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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
1 hr 6 min
August 22, 2024 China Tech, Carbon, and Option Overlays in ETFs? Yep, with James Maund of KraneShares
Today’s episode on The Derivative, Jeff Malec sits
down with James Maund, a veteran of the financial industry with experience spanning Goldman Sachs, the NYSE floor, and his current role at KraneShares. Maund provides a unique insider's perspective on the rapid growth and innovation within the ETF space while outlining KraneShares main investment pillars – China Tech, Carbon emissions/cap-and-trade, and options-based overlay strategies designed to generate income and downside protection. Maund shares his views on the challenges and opportunities facing both established ETF providers and new entrants, as well as the importance of education and alignment with investor expectations. The conversation delves into the role of market makers, the impact of regulatory changes, and the potential risks and benefits of increased options and derivatives usage in the ETF industry. Maund also offers a glimpse into KraneShares' plans for the future, highlighting areas of focus such as alternative investments and the continued growth of the carbon markets. Whether you're an ETF enthusiast or simply interested in the evolving landscape of investment products, this episode provides a comprehensive and insightful look at the dynamic world of exchange-traded funds.
Chapters:
00:00-02:02=Intro
2:03-9:15= Loyalties to the East coast, Goldman Sachs and the NY Stock exchange
9:16-20:38= KWEB – The China Tech ETF, Carbon Emissions and downside protection
20:39-34:53= The Pillars of Krane Shares: Liquid futures,
writing calls and important tickers
34:54-48:34= The Evolution of the ETF, ETF options, starting an ETF and the challenges that come with it
48:35-58:02= Further developments, Unique ETFs and new ETF restrictions
From the episode:
The Derivative podcast episode with Nancy Davis
Follow along with James on LinkedIn and visit KraneShares.com for more information.

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59 min
August 08, 2024 Unpacking the Sell-Off! Awesome Insights from discretionary macro trader Asim Ghaffar
Today's episode features an in-depth discussion with discretionary global macro trader Asim Ghaffar, founder and CIO of AG Capital. Ghaffar shares his insights on the recent market volatility, including his views on the potential triggers behind the sell-off and the chances we have for a recession. Was it just a blip on the radar, algos deleveraging? He explains his discretionary macro trading approach, highlighting the importance of risk management, position sizing, and the psychological challenges of the business. Ghaffar also discusses the differences between his strategy and systematic trend following, as well as the unique opportunities smaller managers can pursue compared to large global macro funds. In this chat we also explore Ghaffar's personal journey into the industry, the challenges of starting a hedge fund, and his long-term outlook on markets, including his perspective on the role of gold in a portfolio.

Chapters:

00:00-02:01=Intro
02:02-11:14= What triggered the Sell-off? The Yen Carry
trade? Or just algos gone wild…
11:15-22:35= The secret sauce to a long-term approach, algo moves and the mental games of trading
22:36-31:55= Discretionary vs Global Macro & the
unsolvable puzzle or crack under the pressure
31:56-43:00= Psychology & Philosophy? The real head
games of trading & sparks to start a hedge fund
43:01-49:50= The potential of a recession, who wants it? Fed rate cuts, the wealth effect, & investment vs trend
49:51-01:06:19= What’s beyond the horizon, staying out of the noise and focus on the fed
01:06:20-01:14:22= Commodity prices for discretionary
trading & what’s with gold? Getting perspective…

From the episode:
Derivative episode: Wisdom from the wizard maker with
Jack Schwager

Follow along with Asim on LinkedIn and AG Capital's LinkedIn. For more information on AG Capital visit agcapital.fund

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1 hr 15 min
July 25, 2024 Hedge Fund Quants Unlock the Power of Dispersion: Versor's Unique Cross-Sectional Relative Value Approach
In this episode of The Derivative, host Jeff Malec sits down with DeWayne Louis and Nishant Gurnani
from Versor Investments, a quantitative investment firm celebrating its 10th anniversary. The discussion delves into the personal backgrounds and journeys that led to Versor’s founding, from their work providing efficient exposure to traditional hedge fund strategies through risk premia type approaches to new methods such as their unique GETT program which goes long/short more thana
dozen global stock index futures markets.

The conversation explores the evolving skill sets required in the hedge fund industry, including the importance of math, quantitative finance, and AI/machine learning expertise.
Versor's investment strategies are examined, focusing on their use of alternative data sets and innovative approaches to alpha generation, such as their
cross-sectional relative value strategy which looks to capture dispersion in global equity markets through more than 30 alpha forecast models across short, medium, and long term time frames.

Join us for this comprehensive look into the quantitative investment strategies and innovative thinking that have helped Versor navigate the competitive hedge fund landscape over the past decade.
Chapters:
00:00-01:38=Intro
01:39-12:22= Summer in the City and starting a Quant firm
12:23-25:10= 3 broad strategies, cross-sectional portfolios & positive convexity
25:11-42:57= GETTing into the strategy, dispersion across markets & capturing market dislocations
42:58-54:26= Alternative data sets & natural language
processing
54:27-01:01:38= Using A.I., generative models & compliance constraints
01:01:39-01:10:51= Long short equity, use of data & the next 10 years

From the episode:
Has Trend Gone Flat? Return Convexity in Trend Following (whitepaper)
Versor10: A Decade of quantitative research in 10 whitepapers
Bastian Bolesta on The Derivative episode
Salemn Abraham on The Derivative episode
Follow along with Versor on Twitter @VersorInvest, look them up on LinkedIn - DeWayne | Nishant and check out their website versorinvest.com for more information
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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
1 hr 11 min
June 27, 2024 Volatility Vultures: Hunting for Options Talent with Gary Selz of Zero Delta
In this episode of the Derivative we chat with Gary Selz, co-founder of Zero Delta Funds. Gary shares his background growing up in Chicago and studying electrical engineering at Northwestern University. He discovered options trading through a financial engineering course and was introduced to a Chicago prop trading firm. Gary discusses his experience training as a new trader at the prop firm. He explains how traders are given time and support to learn before getting their own book to trade. Gary reflects on the diverse career paths that can lead traders to prop shops, from poker players to accountants. The conversation covers Gary's transition from trading to investing his own money in volatility
strategies. This led him to co-found Zero Delta Funds and launch a fund seeking talented volatility traders from across the globe and not always where you’d
expect. Gary highlights their process of finding under-the-radar traders internationally and evaluating their sophistication. Gary and Jeff discuss various aspects of options trading, including the evolution of the market
landscape. They analyze single stock versus index volatility trading. Gary shares insights on the current opportunity set and speculates on potential future market catalysts. Come join us as we dig deeper into option and vol trading and into the mindset of successful volatility traders.
Chapters:
00:00-01:34=Intro
01:35-15:45=Electrical engineering to prop trading, nature vs nurture & trading floor antics
15:46-25:08= Balancing talent with technology in prop firms – traders finding their edge
25:09-31:42= Launching Zero Delta, investing in volatility with no strategy drift
31:43-45:19= Option vs Vol traders, Getting an edge, seeking out specialty traders
45:20-57:01= Single name vol, what’s Zero delta? And positioning your portfolio for the unknown
Follow along with Gary on Twitter @SelzGary, check him out on LinkedIn and make sure to visit zerodeltafunds.com for more information.

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58 min
June 26, 2024 Carry On: Demystifying the Carry Trade with Rodrigo Gordillo & Adam Butler of ReSolve
We’re back! Today’s podcast features The Derivative show stoppers Rodrigo Gordillo and Adam Butler of Resolve Asset Management discussing the carry trade and its
applications in investment strategies. They begin by explaining what the carry trade is and discussing common misconceptions around it. They then dive into different types of carry that can be found in various asset classes like bonds, commodities, currencies, and equities. The guests discuss how carry strategies can be implemented, either on their own or as part of a larger multi-strategy
portfolio. They also compare carry to trend following strategies and debate the pros and cons of each approach. The podcast explores how a diversified carry
factor can provide returns with reduced risk when combined with other strategies. Rodrigo and Adam explain how carry fits into their risk parity framework and can be used to tilt allocations. They also discuss integrating carry and trend signals to lower trading costs. Gear up to receive that spoonful of sugar that indeed will make the medicine go down with tons of insight and access to some great content as an investment factor and
perspectives on its role in multi-asset portfolios.
Chapters:
00:00-01:31= Intro
01:32-10:31= What’s a carry trade?
10:32-20:34= Types of carry in different asset classes & Implementing strategies
20:35-33:11= Carry vs Trend & portfolio applications of carry
33:12-49:05= Combining carry & trend: How does it fit together?
49:06-01:04:54= Why Carry? The future of carry strategies
From the episode:
The Rise of Carry(Book)
The Carry Trade post
Get Stacked Podcast
ReSolve Riffs Podcast
Setting the Risk Parity Record Straight - The Derivative episode
Researching the Risks of return stacking with Corey Hoffstein & Rodrigo Gordillo - The Derivative episode
Asset Allocation, AI, and the Alpha process with Resolve - The Derivative episode

Follow along with ReSolve Asset Management on Twitter/X @InvestReSolve Adam Butler @GestaltU & Rodrigo Gordillo @RodGordilloP, LinkedIn and check out their research page for more information

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1 hr 5 min

About The Derivative

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Welcome to The Derivative by RCM Alternatives, where we dive into what makes alternative investments go, analyze the strategies of unique hedge fund managers, and chat with interesting guests from…