Corey Hoffstein, Chief Investment Officer of Newfound Research, interviews Benn Eifert, founder of QVR Advisors on volatility investing. This is an excellent podcast that I highly recommend for anyone interested in options. For me, the best part is Benn’s discussion on risk, but I enjoyed the whole thing. And speaking of vol investing, here is my still all time favorite relative vol trade that we did (for only 2 customers) during Y2K:
Late in 1999, implied vol for crude oil in 1Q2000 moved higher because many traders (risk managers) were afraid to sell options not knowing what Y2K would bring… Crude vol moved above heating oil vol going into the winter. The trade was selling crude vol, buying heat vol and expecting nothing Y2K related to happen as the we clicked into 2000. Nothing did happen, implied vol in crude moved lower relative to heating oil. And, the cherry on top, temperatures turned bitterly cold which shot up prices and vol in heating oil, while crude oil remained stable.
Do listen to the whole thing, here…
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