Hello, and welcome to another episode of the Odd Thoughts Podcast. I'm Tracy Hallaway and I'm Joe. Wasn't thal Joe? Yes? Did you know? Did you know that the VIX futures 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 I didn't realize it had been six months. So basically that means that investors are hedging again. It's 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 upwards sloping because there's more uncertainty further out into the future, and so you pay more for that volatility insurance. So kind of unusual to have the VIX curve downwards sloping for this long, And I guess it's one of those things that 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 ways 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, etcetera. And so yes, sort of intuitive that people want hedges in the here and now. Yeah, 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 presence. 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 to things go up, the economy improves, stocks go up, etcetera. 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 curve slope upward in the first place. But anyway we can, 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 upwards in normal times. Um, 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 gonna 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 US 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 upwards 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 the virus itself, the big thing that's coming up on November three of this year, which could be uh producing extraordinary amount of uncertainty. There's been so much interest um in uh what volatiary futures or vict futures curves on all sorts of asset classes are sort of anticipating on 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 Sidile. He's the co c i O over at Ambrosk 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 a THOTS. Hey, good morning, Thank you. Then meet 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 vixed curve downward sloping? What are you saying in terms of ptging demand and things like that? Right, So, uh, it's very easy to tell that everybody is fixated on the December ball, right, and it's for good reason to write. You have the potential resurgence of the comtavirus, you have the election time hotility, you have the potential for corporate earning blagging. Thanks for pointing this week. So that's pretty big, especially because of not everything that's been taking place in trading on the baby side. So everybody has been fixated on December ball, and there has been a constant bid um. Even back in late August, we've seen that correalition break between Vixen Spot and you know, people were watching that that was a little bit supply and demand driven. We we understand that there was a big player in the market that helped propel that due to some of the dealer gama hedging, etcetera, etcetera. I could go on for for hours about that one. I think people have a concern about the upcoming catalysts, and we're being 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, you know, go out, make sure you protect yourself. So it's been a constant bid involved at that level. You know. I've been tweeting this is that when the term structure is so elevated, like what we see involves so bit up, it's very difficult to get that added convexity in the move. And what I mean is that when Vault is so pre bid, it's somewhat priced in al right, so people are kind of anticipating this. People are pre hedged the move that you need to get VIX to like a seventy or eighty. It has to be real panic and real fair in the market, and you won't get that if guys are pre heads, right, because let's think about it in the most basic conceptual way. If you have a book, all right, let's just say you're running a million dollar books, right, and you have your heades on them and the market is down seven right, your pre heads. So you're not gonna go and rush to the exit door right to sell off your positions because you really have your heads. And when you have that across the entire landscope, right, it becomes much more difficult to get volved to to really get going. It's like that example of like what causes the vex to really 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, no, So I mean just 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 streets. And since then it's just been nothing but fear of a second wave, fear of ongoing economics sort of fall out, 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 were already have already been fearful, right, right, So it's uh, it's that pre hedged position that will disable all from going through the group, right, It needs to be uh, somewhat of a fear factor. And I was saying this that in order for VALL to really get going in December, you need a fresh catalyst, all right, So the the election time just isn't enough to really get the ball to go through how people are anticipating. And you were seeing that in the divergence between d v I X and X. Right, I X is VOLA 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 are pre hedged, but there isn't a massive rush to prehdge. 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 wards, 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. One week later we hear China's like, okay, guys, well sorry, you know, we need to reassess these this trade deal that we were talking about, right, So, a fresh new catalysts like that, or you know, something just completely out the woodwork could be enough to get the market to get going. But it's very difficult to get volatility to really proof like a vix um a X move to seventy or eighty 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. M 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 vall exposure at the moment. So that's a really good question. Um, there are people that are out there that are taking advantage of this, and and you know they're looking to sell all. We actually know a couple of institutional guys who are trying to take advantage of this, but no they I think they are resting there in a more sophisticated way where they are um hedged off. But I would not suggest this to the average retail guy because there are a lot of complexities that go in to do this. With the recent correlation break in spotting VIX, it's very difficult to determine what the market is going to do. You can't have too much conviction that sid because you could have a situation where Spott is down and ball is down, all right, or you could have an inverse of that situation, right, 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 shootball. 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 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 the view which 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 I mean, has just been one of those years where I feel like I call it the critosis here because everything that is like a two delta, a five delta and 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 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 most specifically, I'm just gonna say, like you know, I'm just gonna capture that the VRP and and short ball here because the wrist of awards just doesn't really pan out. I'm actually 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 vall because the sort of realized volatility UM going into the election is probably not going to be as high as the headgers 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, um, a little bit of regression in some relative value things. I think earning this season is really really promit. I think it's going to for guidance, is going to really paint the picture for us, and I think reality will set in a little bit because um, I'm anticipating a little bit of a slowdown in corporate earning uh 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 Mega's focused on you know, vix up. You know, we look to express some of our views and in some of the sectors with single names and then also the ets right. So for example, if we're looking at a you know, the cues to i w M. You know, maybe we think the cues are trading relatively rich and i WM this trading relatively cheap from from a ball standpoint, right, maybe thirty day implied ball or you know, we we like to focus on the wings, so we'll be looking at how is Kurtosis trading, right, is the five delta and underputs or five delta and 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. And I mean, you know, from just eliminating okay, like ball itself this election time, it's very important in relationship sectors, right, think about how important the oil sector is, Think about how important healthcare sectors, 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 um 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 and certain sectors that could present um a little bit bit more opportunity there, then oh yeah, I'm just gonna play like a calendar spread and you know, sell January balls and by December balls or vice versa. I wanted to zoom out a little bit and and sort of move away from the near term concerns about potential fat tails and the upcoming election and talk about vol utility 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 Effort'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 too? Is it central banks or is it the way big ball players are actually dealing in the space at the moment. First of all, shout out to be Ben, such a good dude, I love that. But yeah, so vulatility is absolutely suppressed, but we're not seeing the same level of suppression as we were seeing pre the covid um because a lot of these short ball funds and a lot of the funds that just focused on selling you know, like the ten delta put or you know, it's put or whatnot, those guys are kind of those guys have been kind of blown out, all right, So you're not really seeing the level of suppression that we were seeing pre covid However, there I should say that this is on a relative level because it's still a very heavy amount of mulatility 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 on generating a return. What can you do in this market? Right? Are you gonna go buy corporate bonds where you have to take on the same sort of default risks as you would with an equity, Or are you gonna go buy a treasury where you're yielding like zero percent? Right? There comes to point time when you're looking at at the the menu and you're saying yourself, all right, you know, I might as well just be invested in equity. Right. So what global arrates beings so low? Its 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 this interesting dynamic taking place with structure products just blowing up. Right, you have I mean I was doing the exotics could be a mode and I can tell you for a fact. You know, January before UM the COVID situation was an amazing month. People were eating structure products. The appetite for it is huge. Right. So you think about everybody who is in the investing role now, right, they want a piece of They want a little bit of everything compiled into one. Right, So they want a little bit of health care, they want a little bit of check, they want a little bit of UM energy, and they wanted all on one little one basket right, hence the growth of EPP products. But what we are seeing is this dynamic is actually taking away from market crept. So if you were to look at the main components in the spy and the queue, right, the components that are in the two are the same thing, right, It's basically the exact same thing, right. So what what this is telling you is that the market is being driven or no breath. Right. So as much as people want to diversify and they're just trying to diversify, their portfolio is creditated on the large name, right. So with the growth of structure products, with the low global rates and the force rush to too equities and then to us in passive investing with the millennial group, they're just like, oh yeah, I want I want to be invested in a novel that's going to return, you know, a guarantee twelve percent 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 types 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 out and we're seeing that right because people complain so much about you know, the Robin Hooders and you know or some of the market flow that comes from there, right. But it's not only the Robin Hooders, right, it's the millennials that are a little more open to taking the risks. Myself and my team, we've 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 events take place more frequently than you were seeing, you know, in the nineties or the eighties. So you know, you mentioned having been on the on the cell side on the desk at BMO, and of course, um, you know again talking about our conversation with Ben a few weeks ago. Would you learn from that experience that you've taken over to the buy side, and how does that in sort of like, what did that experience teach you in terms of the opportunities that arise due to the positioning of the cell side of the dealers and so forth, how does that help you think about in spot opportunities. I was actually speaking to UH. I was actually at my old university and I was speaking UH 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 expression you? And you know what is it that you look for? Right? So this gentleman had no idea what delta vega gamma was, which was okay, Right, he's a college student who go through what we all learned. 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 convex the component. Right, So people are very fixated on obserus trating 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 heade off their risks, and you add that in and that leads to excessive dealer gamma heaging, 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. UM 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 movie 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 Ambers. But one thing that really opened my eyes was a situation that took place and I wanted to stay late February or launch, but it was really an eye opener to me that the book moves in a particular way that we didn't anticipate, right, And although obviously you know, I understood and knew the intricacies of the other gamma hedging, right, and obviously on a day to day base, I went through that process right when we hedged off our books, you know, at the beginning of the morning or or the end of the night, because that was our job. One of the exactly success the job was just use money for the bank, right, So you're you're basically there as the protection trader. So I remember the market was taking and we've got the call from the heads up and my boss at the time literally just I sat um one row away from him, 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 Gamas movies, and I'm saying to myself like, 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 prices, 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 sps teachers and basically I s so synthetically, what does that do? Right? That drives the price of the market down, and that drives the price of FIXEL 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 side and do this when the market was already getting hammered. And I see us of myself, this is taking place across the streets, and it really sank into me that this is much more severe than people give give it credit. Because obviously I understood the ramifications of this, because you know, I praised on the buy side before there, and you know, I I understand how market microstruction works. But when you see it in real time and you see how you're moving the market with so much side and it's other guys that are doing the exact same thing, and if you have force liquidations things in place, it kind of really just clicks to you and you're like, oh my gosh, like that was literally just 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 Amber right. We are fixated on capturing those left and right tail events. Right. So we believe that with excessive all totally 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 Chris truth selling you know, variants left and right right. So it's just about wasting for for the for the complacency, the setting right, because when March of points point took place, everybody has that fresh in their minds, right, So everybody's now they want to manage risk right now. They want to focus on on on heading off the book right. But there will come a point time where the market is just going up and people are gonna be like, oh, you know I don't tape the hedge. I don't need to. Why do this? You know it's taking away three percent deals for me for a year. You know, I don't need this anymore. That's when we will have more of these emphasized moves takes place where you see a move like that, you know you have a right tail event or a left till event. And we believe that the way how we are set our positioning, we're going to be able to capture those type of moves because as the market mark streuss things with that, we believe that these moves will happen much more frequently than people are giving freedance. 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 vixed futures or something like that. How much freedom freedom is in the right word. How much creativity do you have in manage in 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 dector, right, So at the end of the day you're gonna need to be negative delta. So no matter how you want to flip it, if you want to say, Okay, you know, I'm gonna try to sell something that I believe is relatively cheaper that carries 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 gotta get out of the house, all right. So it's literally the the exact same thing. If 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 gonna be able to escape the situation measure, and then then that's basically Okay, I'm at a point where I need to minimize your all right. So I heard a m I think it was actually Chris Cole. Chris Cole said this when I podcast, and he was basically saying, like when the market was tanking, we had our our phones ringing off the hook, and you know, everybody wanted to to hide a point, but you're bid crent like, look, there's nothing I can do for you at this point, Like you you want you want to try to hide up your book now when the market takes you down, like the time to head 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, you know, I don't really need this right now? Why am I gonna lose flod percent off 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 five percent and your books paying for volatility, but it's going to off set those losses where you're gonna lose thirty five And in some situations, guys, if you were positioned well enough like we did. You know, we did um ah our tests to see where our positioning would be in and watch, and it was very easy to see that with a small allocation, not only would you have recoup your losses on and based on the allocation that we believe and I won't go into it, you know, discussing that on the podcast, but you would have not only recoup your losses, but you would have made money. So you know, obviously contingent on the allocation side and whatnot, but there is a situation where this thing is not only served as a perspective base, but it could also make money for you. And you know, even if you were just a blind guy that just decided blinding 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 your focus is basically on one thing, and that's really just to mitigate list. I want to go back to the question that I asked right at the beginning, which is why do all curve slope upboards? 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, for the next two years, the next five years, um, it's probably gonna 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, just like over the long term, hold for the long term stocks usually go up, etcetera. 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 ramistications will be. Right, And it's one of those situations where when the AD launched to take place, most likely it's the beginning of what will be a bigger ball, right, 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 philostrophical standpoint, guys to do it. But you know, I think people who don't really trade ball atility. I didn't know that when the market tanked in February 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, um, well let's just say in jail, like two years out the vall on that didn't really move as much as people anticipate, right, But the longer dated, the real longer dated ball stuff like you know, you don't know five years, three years the year, that type of stuff doesn't really get going when fall is uh something like that. You know, So there is that miscon stuff and that people have where you know, they think like, well, you know, five years, five years of old or whatever, it's probably slight. So you know, I'm just gonna sell it. Well, it's not easy. I think everybody would just set up is you just do that? But yeah, from philostophical standpoint, I could see why, uh, or projecting its tough, right, And I mean you to think about all the bright hands in the market, right, we have so many intelligent guys, and nobody can per project volatility. There's a big assumption factor and there's a lot of variance and a ton of variability and in those types 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, you could make 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 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, against thinking talking to Chris trying to bend think about all these retail traders who have come in to the market either 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 this sort of like passive like I'm just getting, you know, by 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 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 um, 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 curve slope upward. It doesn't make any sense to me. 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 also know, I feel like the long term, I mean, look, I think has kind of jaded me about what can happen in a single year. Let alone over the course of a decade, but any tomorrow could be very weird. We know that, what about ten years from tomorrow, Well, ten years from tomorrow, every single advisor we would ever talk about say, yeah, stocks will probably be hard. Yeah, but you don't know what it's like, Like this is like but you don't know what happens in the meantime. Who cares? And I guess I'm still like on the hunt for like a totally satisfying answer about how the investment industry's view could be docs 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 mages. Okay, 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 ten years in the future. Everyone should come to you for their long term hedging needs. Yeah, I'm 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 vall, but do I really want to be on the hook for it? Maybe that's the issue. I just don't want to. 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. Okay? Well, on that note again, everyone buy vall exposure from Joe he's offering. But in the means time. This has been another episode of the All Thoughts Podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Alloway. And I'm Joe Wisenthal. You can follow me on Twitter at the Stalwork. Follow our guest on Twitter, Chris Steel. He's at he S I D I I I So Pasted with three Eyes. Follow our producer Laura Carlson at Laura M. Carlson. Follow the Bloomberg head of podcast, Francesco Levie at Francesco Today, and check out all of our podcasts at Bloomberg under the handle at podcast. Thanks for listening to

Hello, and welcome to another episode of the Odd Thoughts Podcast. I'm Tracy Hallaway and I'm Joe. Wasn't thal Joe? Yes? Did you know? Did you know that the VIX futures 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 I didn't realize it had been six months. So basically that means that investors are hedging again. It's 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 upwards sloping because there's more uncertainty further out into the future, and so you pay more for that volatility insurance. So kind of unusual to have the VIX curve downwards sloping for this long, And I guess it's one of those things that 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 ways 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, etcetera. And so yes, sort of intuitive that people want hedges in the here and now. Yeah, 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 presence. 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 to things go up, the economy improves, stocks go up, etcetera. 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 curve slope upward in the first place. But anyway we can, 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 upwards in normal times. Um, 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 gonna 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 US 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 upwards 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 the virus itself, the big thing that's coming up on November three of this year, which could be uh producing extraordinary amount of uncertainty. There's been so much interest um in uh what volatiary futures or vict futures curves on all sorts of asset classes are sort of anticipating on 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 Sidile. He's the co c i O over at Ambrosk 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 a THOTS. Hey, good morning, Thank you. Then meet 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 vixed curve downward sloping? What are you saying in terms of ptging demand and things like that? Right, So, uh, it's very easy to tell that everybody is fixated on the December ball, right, and it's for good reason to write. You have the potential resurgence of the comtavirus, you have the election time hotility, you have the potential for corporate earning blagging. Thanks for pointing this week. So that's pretty big, especially because of not everything that's been taking place in trading on the baby side. So everybody has been fixated on December ball, and there has been a constant bid um. Even back in late August, we've seen that correalition break between Vixen Spot and you know, people were watching that that was a little bit supply and demand driven. We we understand that there was a big player in the market that helped propel that due to some of the dealer gama hedging, etcetera, etcetera. I could go on for for hours about that one. I think people have a concern about the upcoming catalysts, and we're being 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, you know, go out, make sure you protect yourself. So it's been a constant bid involved at that level. You know. I've been tweeting this is that when the term structure is so elevated, like what we see involves so bit up, it's very difficult to get that added convexity in the move. And what I mean is that when Vault is so pre bid, it's somewhat priced in al right, so people are kind of anticipating this. People are pre hedged the move that you need to get VIX to like a seventy or eighty. It has to be real panic and real fair in the market, and you won't get that if guys are pre heads, right, because let's think about it in the most basic conceptual way. If you have a book, all right, let's just say you're running a million dollar books, right, and you have your heades on them and the market is down seven right, your pre heads. So you're not gonna go and rush to the exit door right to sell off your positions because you really have your heads. And when you have that across the entire landscope, right, it becomes much more difficult to get volved to to really get going. It's like that example of like what causes the vex to really 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, no, So I mean just 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 streets. And since then it's just been nothing but fear of a second wave, fear of ongoing economics sort of fall out, 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 were already have already been fearful, right, right, So it's uh, it's that pre hedged position that will disable all from going through the group, right, It needs to be uh, somewhat of a fear factor. And I was saying this that in order for VALL to really get going in December, you need a fresh catalyst, all right, So the the election time just isn't enough to really get the ball to go through how people are anticipating. And you were seeing that in the divergence between d v I X and X. Right, I X is VOLA 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 are pre hedged, but there isn't a massive rush to prehdge. 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 wards, 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. One week later we hear China's like, okay, guys, well sorry, you know, we need to reassess these this trade deal that we were talking about, right, So, a fresh new catalysts like that, or you know, something just completely out the woodwork could be enough to get the market to get going. But it's very difficult to get volatility to really proof like a vix um a X move to seventy or eighty 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. M 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 vall exposure at the moment. So that's a really good question. Um, there are people that are out there that are taking advantage of this, and and you know they're looking to sell all. We actually know a couple of institutional guys who are trying to take advantage of this, but no they I think they are resting there in a more sophisticated way where they are um hedged off. But I would not suggest this to the average retail guy because there are a lot of complexities that go in to do this. With the recent correlation break in spotting VIX, it's very difficult to determine what the market is going to do. You can't have too much conviction that sid because you could have a situation where Spott is down and ball is down, all right, or you could have an inverse of that situation, right, 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 shootball. 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 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 the view which 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 I mean, has just been one of those years where I feel like I call it the critosis here because everything that is like a two delta, a five delta and 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 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 most specifically, I'm just gonna say, like you know, I'm just gonna capture that the VRP and and short ball here because the wrist of awards just doesn't really pan out. I'm actually 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 vall because the sort of realized volatility UM going into the election is probably not going to be as high as the headgers 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, um, a little bit of regression in some relative value things. I think earning this season is really really promit. I think it's going to for guidance, is going to really paint the picture for us, and I think reality will set in a little bit because um, I'm anticipating a little bit of a slowdown in corporate earning uh 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 Mega's focused on you know, vix up. You know, we look to express some of our views and in some of the sectors with single names and then also the ets right. So for example, if we're looking at a you know, the cues to i w M. You know, maybe we think the cues are trading relatively rich and i WM this trading relatively cheap from from a ball standpoint, right, maybe thirty day implied ball or you know, we we like to focus on the wings, so we'll be looking at how is Kurtosis trading, right, is the five delta and underputs or five delta and 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. And I mean, you know, from just eliminating okay, like ball itself this election time, it's very important in relationship sectors, right, think about how important the oil sector is, Think about how important healthcare sectors, 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 um 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 and certain sectors that could present um a little bit bit more opportunity there, then oh yeah, I'm just gonna play like a calendar spread and you know, sell January balls and by December balls or vice versa. I wanted to zoom out a little bit and and sort of move away from the near term concerns about potential fat tails and the upcoming election and talk about vol utility 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 Effort'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 too? Is it central banks or is it the way big ball players are actually dealing in the space at the moment. First of all, shout out to be Ben, such a good dude, I love that. But yeah, so vulatility is absolutely suppressed, but we're not seeing the same level of suppression as we were seeing pre the covid um because a lot of these short ball funds and a lot of the funds that just focused on selling you know, like the ten delta put or you know, it's put or whatnot, those guys are kind of those guys have been kind of blown out, all right, So you're not really seeing the level of suppression that we were seeing pre covid However, there I should say that this is on a relative level because it's still a very heavy amount of mulatility 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 on generating a return. What can you do in this market? Right? Are you gonna go buy corporate bonds where you have to take on the same sort of default risks as you would with an equity, Or are you gonna go buy a treasury where you're yielding like zero percent? Right? There comes to point time when you're looking at at the the menu and you're saying yourself, all right, you know, I might as well just be invested in equity. Right. So what global arrates beings so low? Its 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 this interesting dynamic taking place with structure products just blowing up. Right, you have I mean I was doing the exotics could be a mode and I can tell you for a fact. You know, January before UM the COVID situation was an amazing month. People were eating structure products. The appetite for it is huge. Right. So you think about everybody who is in the investing role now, right, they want a piece of They want a little bit of everything compiled into one. Right, So they want a little bit of health care, they want a little bit of check, they want a little bit of UM energy, and they wanted all on one little one basket right, hence the growth of EPP products. But what we are seeing is this dynamic is actually taking away from market crept. So if you were to look at the main components in the spy and the queue, right, the components that are in the two are the same thing, right, It's basically the exact same thing, right. So what what this is telling you is that the market is being driven or no breath. Right. So as much as people want to diversify and they're just trying to diversify, their portfolio is creditated on the large name, right. So with the growth of structure products, with the low global rates and the force rush to too equities and then to us in passive investing with the millennial group, they're just like, oh yeah, I want I want to be invested in a novel that's going to return, you know, a guarantee twelve percent 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 types 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 out and we're seeing that right because people complain so much about you know, the Robin Hooders and you know or some of the market flow that comes from there, right. But it's not only the Robin Hooders, right, it's the millennials that are a little more open to taking the risks. Myself and my team, we've 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 events take place more frequently than you were seeing, you know, in the nineties or the eighties. So you know, you mentioned having been on the on the cell side on the desk at BMO, and of course, um, you know again talking about our conversation with Ben a few weeks ago. Would you learn from that experience that you've taken over to the buy side, and how does that in sort of like, what did that experience teach you in terms of the opportunities that arise due to the positioning of the cell side of the dealers and so forth, how does that help you think about in spot opportunities. I was actually speaking to UH. I was actually at my old university and I was speaking UH 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 expression you? And you know what is it that you look for? Right? So this gentleman had no idea what delta vega gamma was, which was okay, Right, he's a college student who go through what we all learned. 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 convex the component. Right, So people are very fixated on obserus trating 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 heade off their risks, and you add that in and that leads to excessive dealer gamma heaging, 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. UM 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 movie 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 Ambers. But one thing that really opened my eyes was a situation that took place and I wanted to stay late February or launch, but it was really an eye opener to me that the book moves in a particular way that we didn't anticipate, right, And although obviously you know, I understood and knew the intricacies of the other gamma hedging, right, and obviously on a day to day base, I went through that process right when we hedged off our books, you know, at the beginning of the morning or or the end of the night, because that was our job. One of the exactly success the job was just use money for the bank, right, So you're you're basically there as the protection trader. So I remember the market was taking and we've got the call from the heads up and my boss at the time literally just I sat um one row away from him, 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 Gamas movies, and I'm saying to myself like, 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 prices, 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 sps teachers and basically I s so synthetically, what does that do? Right? That drives the price of the market down, and that drives the price of FIXEL 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 side and do this when the market was already getting hammered. And I see us of myself, this is taking place across the streets, and it really sank into me that this is much more severe than people give give it credit. Because obviously I understood the ramifications of this, because you know, I praised on the buy side before there, and you know, I I understand how market microstruction works. But when you see it in real time and you see how you're moving the market with so much side and it's other guys that are doing the exact same thing, and if you have force liquidations things in place, it kind of really just clicks to you and you're like, oh my gosh, like that was literally just 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 Amber right. We are fixated on capturing those left and right tail events. Right. So we believe that with excessive all totally 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 Chris truth selling you know, variants left and right right. So it's just about wasting for for the for the complacency, the setting right, because when March of points point took place, everybody has that fresh in their minds, right, So everybody's now they want to manage risk right now. They want to focus on on on heading off the book right. But there will come a point time where the market is just going up and people are gonna be like, oh, you know I don't tape the hedge. I don't need to. Why do this? You know it's taking away three percent deals for me for a year. You know, I don't need this anymore. That's when we will have more of these emphasized moves takes place where you see a move like that, you know you have a right tail event or a left till event. And we believe that the way how we are set our positioning, we're going to be able to capture those type of moves because as the market mark streuss things with that, we believe that these moves will happen much more frequently than people are giving freedance. 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 vixed futures or something like that. How much freedom freedom is in the right word. How much creativity do you have in manage in 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 dector, right, So at the end of the day you're gonna need to be negative delta. So no matter how you want to flip it, if you want to say, Okay, you know, I'm gonna try to sell something that I believe is relatively cheaper that carries 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 gotta get out of the house, all right. So it's literally the the exact same thing. If 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 gonna be able to escape the situation measure, and then then that's basically Okay, I'm at a point where I need to minimize your all right. So I heard a m I think it was actually Chris Cole. Chris Cole said this when I podcast, and he was basically saying, like when the market was tanking, we had our our phones ringing off the hook, and you know, everybody wanted to to hide a point, but you're bid crent like, look, there's nothing I can do for you at this point, Like you you want you want to try to hide up your book now when the market takes you down, like the time to head 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, you know, I don't really need this right now? Why am I gonna lose flod percent off 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 five percent and your books paying for volatility, but it's going to off set those losses where you're gonna lose thirty five And in some situations, guys, if you were positioned well enough like we did. You know, we did um ah our tests to see where our positioning would be in and watch, and it was very easy to see that with a small allocation, not only would you have recoup your losses on and based on the allocation that we believe and I won't go into it, you know, discussing that on the podcast, but you would have not only recoup your losses, but you would have made money. So you know, obviously contingent on the allocation side and whatnot, but there is a situation where this thing is not only served as a perspective base, but it could also make money for you. And you know, even if you were just a blind guy that just decided blinding 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 your focus is basically on one thing, and that's really just to mitigate list. I want to go back to the question that I asked right at the beginning, which is why do all curve slope upboards? 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, for the next two years, the next five years, um, it's probably gonna 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, just like over the long term, hold for the long term stocks usually go up, etcetera. 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 ramistications will be. Right, And it's one of those situations where when the AD launched to take place, most likely it's the beginning of what will be a bigger ball, right, 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 philostrophical standpoint, guys to do it. But you know, I think people who don't really trade ball atility. I didn't know that when the market tanked in February 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, um, well let's just say in jail, like two years out the vall on that didn't really move as much as people anticipate, right, But the longer dated, the real longer dated ball stuff like you know, you don't know five years, three years the year, that type of stuff doesn't really get going when fall is uh something like that. You know, So there is that miscon stuff and that people have where you know, they think like, well, you know, five years, five years of old or whatever, it's probably slight. So you know, I'm just gonna sell it. Well, it's not easy. I think everybody would just set up is you just do that? But yeah, from philostophical standpoint, I could see why, uh, or projecting its tough, right, And I mean you to think about all the bright hands in the market, right, we have so many intelligent guys, and nobody can per project volatility. There's a big assumption factor and there's a lot of variance and a ton of variability and in those types 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, you could make 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 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, against thinking talking to Chris trying to bend think about all these retail traders who have come in to the market either 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 this sort of like passive like I'm just getting, you know, by 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 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 um, 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 curve slope upward. It doesn't make any sense to me. 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 also know, I feel like the long term, I mean, look, I think has kind of jaded me about what can happen in a single year. Let alone over the course of a decade, but any tomorrow could be very weird. We know that, what about ten years from tomorrow, Well, ten years from tomorrow, every single advisor we would ever talk about say, yeah, stocks will probably be hard. Yeah, but you don't know what it's like, Like this is like but you don't know what happens in the meantime. Who cares? And I guess I'm still like on the hunt for like a totally satisfying answer about how the investment industry's view could be docs 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 mages. Okay, 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 ten years in the future. Everyone should come to you for their long term hedging needs. Yeah, I'm 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 vall, but do I really want to be on the hook for it? Maybe that's the issue. I just don't want to. 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. Okay? Well, on that note again, everyone buy vall exposure from Joe he's offering. But in the means time. This has been another episode of the All Thoughts Podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Alloway. And I'm Joe Wisenthal. You can follow me on Twitter at the Stalwork. Follow our guest on Twitter, Chris Steel. He's at he S I D I I I So Pasted with three Eyes. Follow our producer Laura Carlson at Laura M. Carlson. Follow the Bloomberg head of podcast, Francesco Levie at Francesco Today, and check out all of our podcasts at Bloomberg under the handle at podcast. Thanks for listening to