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Speaker 1: Well can Trillans. I'm Joel Weber and Americal TuS Eric.

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Speaker 1: We've got a couple of guests to talk about a

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Speaker 1: theme that we haven't talked about before. Volatility and exchange

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Speaker 1: treated notes, which is not the same thing as an

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Speaker 1: exchange traded fund. Yeah. This is probably one of the

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Speaker 1: most um kind of controversial, uh power tool esque areas

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Speaker 1: of the E t P market. We covered TP is

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Speaker 1: exchange traded product, right, Yeah, so the way we classified

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Speaker 1: as a t P would be the broader umbrella umbrella

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Speaker 1: of everything within that is E t F E t

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Speaker 1: N S, and then in Europe you have E t

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Speaker 1: c S. So I say a t P to cover

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Speaker 1: because there are E t F S their cover VIX,

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Speaker 1: and there's E t n S the cover VIX and

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Speaker 1: VIX being volatile, VIX is volatility. We'll go over what

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Speaker 1: that is um for people who have heard of it,

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Speaker 1: or we'll define it, and then we'll talk about the

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Speaker 1: products tracking it and try to get into some of

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Speaker 1: the minutia without getting too technical, because this is an

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Speaker 1: area that can get complicated very quickly, but it is

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Speaker 1: an area that is unbelievably resilient and has a loyal

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Speaker 1: loyal fan base and when are we talking about it

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Speaker 1: right now? Well, this year, vix E t p s

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Speaker 1: are flirting with record inflows and record volume. And this

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Speaker 1: is after a year and a half ago when x

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Speaker 1: I V which will go into his inverse fall, which

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Speaker 1: had basically went away. It's almost like the Nats losing

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Speaker 1: Bryce Harper and still making the World Series. Vix E

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Speaker 1: TPS to be able to pull this off without x

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Speaker 1: I V or s v x Y for that matter,

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Speaker 1: is a pretty impressive feat. So I thought this is

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Speaker 1: a good year to talk about it, or a good

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Speaker 1: time to talk about it, um And we have never

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Speaker 1: gone into this area. We we flick at it sometimes

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Speaker 1: with Mike Venuto, we had them on because it's vix

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Speaker 1: E TPS are always in the conversation of how to

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Speaker 1: hedge a portfolio. They are one way UM and he

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Speaker 1: talked about that a little bit. But I thought, let's

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Speaker 1: just go and do a primer on this area vix.

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Speaker 1: We'll go full vix and we have the perfect two

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Speaker 1: people from the joination. We have Luke Kawa from Bloomberg News,

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Speaker 1: who I think probably covers vix the most and the best.

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Speaker 1: I mean, am I wrong? I I'll leave that to you.

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Speaker 1: I can't get I can't give myself as ring a

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Speaker 1: self endorsement, but I'll say I just feel like when

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Speaker 1: I see a Good of All article, it's Luke's name there, um,

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Speaker 1: welcome back to the show he's been on before. Yes,

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Speaker 1: he had the heat, he was a sicker madness and

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Speaker 1: he picked Boon which is now gone. It got replaced

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Speaker 1: by a clean energy. Oh yeah, it was good well

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Speaker 1: at last, and I'm still bitter about about the judging

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Speaker 1: that unceremoniously kicked out first round. First round. And we

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Speaker 1: have Greg King who is now with micro Sectors, which

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Speaker 1: will go into in a bit. That's his new venture.

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Speaker 1: But Greg is pretty much like the George Washington of

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Speaker 1: VIXI TPS. He was at Barkley's back when they started

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Speaker 1: VXX that was the first one. So Greg in a

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Speaker 1: way invented the vix E t P and the E

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Speaker 1: t n UM. Him and Nick Churney who went off

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Speaker 1: and they both started Velocity Shares, which old Ley Nick

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Speaker 1: is still with. Janice bought and that's where x I

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Speaker 1: V was from. So you literally couldn't have a more

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Speaker 1: perfect person to go through vix E TPS and the

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Speaker 1: background this time on trillions, volatility and E t N S. Greg,

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Speaker 1: welcome to the show. Great to be here, Thanks Eric. So, Greg,

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Speaker 1: you've been doing this for about ten years. What what

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Speaker 1: was the inception moment? Why did you think that the

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Speaker 1: world needs e t NS? So, if you go back

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Speaker 1: to two thousand nine when we launched, that was actually

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Speaker 1: the third year that we had experienced building out the

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Speaker 1: iPath platform. You were talking about Barkley's and this is

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Speaker 1: sort of ancient history now, but back then it was

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Speaker 1: a partnership with Ice Shares, which Barkley's still owned. That

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Speaker 1: was pre black Rock. So the idea for it actually

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Speaker 1: came from the I share sales people. They were talking

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Speaker 1: to clients and you know, VIX had been around for

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Speaker 1: a while as an index, and then there were vicked futures,

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Speaker 1: but nobody created an e t P and people wanted

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Speaker 1: it basically as a portfolio hedge. We actually got the

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Speaker 1: idea in probably oh six and research it looked at

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Speaker 1: it couldn't really figure out a way to do it

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Speaker 1: in a way that risk was happy with um until

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Speaker 1: two thousand nine. Oh those risk people, Yeah, So why

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Speaker 1: couldn't have been an E T F well it could

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Speaker 1: have been. I mean, our platform was an e t

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Speaker 1: N that was essentially born out of the difficulty that

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Speaker 1: comes with putting commodities into fort structures whole another podcast.

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Speaker 1: We've done that before, listeners are versed. Yeah, so the

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Speaker 1: E t N actually was was you know, necessity is

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Speaker 1: the mother of invention, right, So back then, UM commodities

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Speaker 1: were kind of a hot idea in the investment sector,

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Speaker 1: and how to get him into E t p s

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Speaker 1: was the problem that we were solving with this E

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Speaker 1: t N structure, which is Eric mentioned is different than

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Speaker 1: an E t F, so it was a workaround. And

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Speaker 1: the E t N we're talking about his VXX, which

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Speaker 1: came out in two thousand nine, U and lou If

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Speaker 1: how would you define the VIX for, say, your mom.

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Speaker 1: So basically, the VIX is something that it's you know,

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Speaker 1: it's called Wall Streets fear gauge, but what it really is,

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Speaker 1: it's a measure of how much investors expect stocks to swing,

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Speaker 1: the SP five to swing over the next month. And

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Speaker 1: you get that by you know, telling up the prices

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Speaker 1: of out of the money options and kind of making

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Speaker 1: a comparative measure that will give you that and essentially,

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Speaker 1: you know, your rule of thumb, rule of sixteen will

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Speaker 1: be you know, if the VIX is around sixteen, that

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Speaker 1: means Wall Street expects and moves of one percent in

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Speaker 1: stocks per day over the next month. And in general,

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Speaker 1: the long term trend has kind of been the rule

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Speaker 1: of thumb. It fixes around twenty or above twenty, people

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Speaker 1: are really scared. People are you know, hunting for guns

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Speaker 1: and ammo and below that, you know, generally normal trade

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Speaker 1: and conditions. The environment that had prevailed right after the

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Speaker 1: financial crisis is a lot of reason why there's a

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Speaker 1: demand for a product like v X. Just the idea

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Speaker 1: that VALL was kind of persistently high. People were worried

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Speaker 1: about hedging this and this is something that kind of

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Speaker 1: did democratize a little more access to to ball and

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Speaker 1: to hedging opportunities here and to add a little context there,

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Speaker 1: VICK spiked in December and then has been relatively low,

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Speaker 1: but then started to float again with the twenties over

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Speaker 1: the summer. Right. Yes, essentially, the VIX has been and

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Speaker 1: you know, JP Morgan has commented on this recently, making

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Speaker 1: that you know, the Ball Feavy index, the VIX has

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Speaker 1: become in the Trump presidency, and since the trade war

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Speaker 1: has kind of picked up and had its ebbs and flows,

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Speaker 1: it's been very sensitive to presidential pronouncements. The kind of

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Speaker 1: the degree of rotation we've had in the markets. You know,

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Speaker 1: a lot of sectors not moving together, not swinging together.

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Speaker 1: The onset of earning season, which is something that keeps

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Speaker 1: a lid on volatility because you know, stock swing for

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Speaker 1: their own reasons and not necessarily all in harmony. That's

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Speaker 1: something that's kind of kept a lid on balmore recently. So.

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Speaker 1: The VIX, as Luke described, is basically a measure of something, right.

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Speaker 1: It's this activity of options which tells you how much

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Speaker 1: of altility people expect stocks to have. You can't invest

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Speaker 1: in that though, it's uninvestable, right, So they made futures

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Speaker 1: on the VIX, right, So just explain how the futures

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Speaker 1: on on the VIX work. Sure, The VIX features pretty

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Speaker 1: simple instrument. It's just a strip of features like in

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Speaker 1: in any futures contract. Uh, you know, one month at

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Speaker 1: a time that are linked to the price of VIX

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Speaker 1: at that point in time. So they'll settle to wherever

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Speaker 1: VIX is trading when they expire and what you have.

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Speaker 1: What you typically see is an upward sloping curve because

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Speaker 1: people think that you know, volatili and future is going

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Speaker 1: to be a little higher than it is now. That's

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Speaker 1: sort of just the general bias. It's it's interesting like

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Speaker 1: in that way. It's volatility is a lot like life.

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Speaker 1: The structure of the curve is pretty important when we

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Speaker 1: talk about vixed products as well. I'm sure we'll we'll

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Speaker 1: get into more lately, but that upward sloping curve, it's

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Speaker 1: like in life, you know when the bad times are here,

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Speaker 1: you know, death in the family, divorced, something like that.

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Speaker 1: You know when you're really stuck in it, and those periods,

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Speaker 1: the VIX curve will flip on a lot of VIX spikes.

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Speaker 1: You will see front front month futures traded a significant

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Speaker 1: premium to second month and further down the road. And

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Speaker 1: it's these kind of relationships and these kind of flips,

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Speaker 1: uh that are part of the investment thesis for a

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Speaker 1: lot of people, and these products and a lot of

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Speaker 1: kind of arbitrage opportunities that do present themselves. So VXX

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Speaker 1: comes along, You've got this futures market, what how do

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Speaker 1: you track it? So with commodities um the general exchange

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Speaker 1: trade product way of of tracking them is essentially to

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Speaker 1: hold a portfolio of T bills as collateral and then

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Speaker 1: put on a futures position equivalent to the entire size

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Speaker 1: of that holding, and roll that position. Right. So roll

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Speaker 1: means because futures contracts have expiry, uh, and you don't

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Speaker 1: want to you know, if you think about corn or something,

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Speaker 1: you don't want to get delivered a bunch of corn

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Speaker 1: because you held onto your features contract too long. Um.

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Speaker 1: In this case, you just get cashed out to the

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Speaker 1: VIX level. But you don't want to do that. You

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Speaker 1: want this to be a perpetual exposure. So you're sitting

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Speaker 1: there rolling these contracts as they expire. And this essentially

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Speaker 1: is where you get. The dangerous part of v XX

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Speaker 1: is that it's not the VIX itself, it's the futures rolling, right.

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Speaker 1: So vxx's constantly having to roll, and as Luke said,

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Speaker 1: in normal times, that means you're going to sell low

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Speaker 1: and buy high over and over and over, and that

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Speaker 1: can be a year, right, And that's essentially the big

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Speaker 1: danger with holding v XX. Correct. Yeah, I mean I

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Speaker 1: think there's other risks the holding v x X, but

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Speaker 1: that's the big one that impacts performance. Right, and people

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Speaker 1: are always but if you think about it, take a

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Speaker 1: step back, it makes perfect sense. Essentially, you are taking

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Speaker 1: a long volatility position, right, and and what that means

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Speaker 1: is you're going to benefit from you know, big moves

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Speaker 1: in the market. Um. However, you're not going to um

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Speaker 1: in options. You pay a premium. You don't lose more

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Speaker 1: than that, right, so your your losses are are limited. Um.

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Speaker 1: But you have theoretically infinite upside if volatility really goes crazy.

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Speaker 1: So there's a cost, basically a time cost theta to

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Speaker 1: holding this position. It should go down over time because

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Speaker 1: you have this non normal potential set of returns that

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Speaker 1: you're looking at. Data. I like that one. We even't

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Speaker 1: I don't think we've dropped that one on the podcast before.

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Speaker 1: I actually told Luke beforehand to like, you know, keep

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Speaker 1: dumb it down a little, and he said, okay, he

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Speaker 1: wouldn't use any Greek symbols that damn is broken. Okay. Um,

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Speaker 1: how many people when you first came out with it,

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Speaker 1: or in general today understand that it holds futures and

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Speaker 1: not the actual VIX index. Hard to say, you know,

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Speaker 1: people are still confused by that, I think, um, but

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Speaker 1: even the futures is not necessarily um, you know, answer

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Speaker 1: all their questions that go, oh, it holds VIXED futures

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Speaker 1: instead of VIX. Okay, got it. You know, there's still

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Speaker 1: a lot to understand because when VIX goes up, let's

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Speaker 1: say the VIX index goes up, if it's not even

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Speaker 1: I know, that's not even quote in a percent, I

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Speaker 1: know he can't handle this. But if you do do

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Speaker 1: an h cp D, which is the way to look

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Speaker 1: daily percentage on the terminal, Let's say the VIX goes

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Speaker 1: v xx will be up like nine of that twenty. Now,

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Speaker 1: why is percentage bad in quoting the VIX again, So

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Speaker 1: it's essentially it's the same reason why we you know,

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Speaker 1: when the ten uere yield goes from you know to

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Speaker 1: one fifty percent, we don't quote that as a percent

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Speaker 1: of a percent move. It's the same thing. What what

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Speaker 1: the VIX is tracking? And you know your rule of

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Speaker 1: sixteen in terms of implied volatility. When the VIX is

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Speaker 1: at sixteen, we expect that means that uh, you know,

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Speaker 1: stocks will move on average one percent per day per month.

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Speaker 1: That goes up to eighteen that's not really a sixteen

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Speaker 1: to eighteen percent increase. I would rather, you know, take

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Speaker 1: the square root and go on and see what the

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Speaker 1: actual change, and that if we reported that as the

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Speaker 1: kind of the percent change and the implied move expected

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Speaker 1: over the next month, that be a fine way to

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Speaker 1: use percent for this instance. But if not, it's just

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Speaker 1: it's quoting something that doesn't exist and isn't even traded,

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Speaker 1: can't be traded, and even in the forms in which

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Speaker 1: it's been made tradeable, isn't really applicable. All right. So um,

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Speaker 1: let's say VIX goes up and this is the jackpot

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Speaker 1: potential we talked about. We write about v x X

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Speaker 1: and why it's in a way critic proof because if

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Speaker 1: you look at the reviews of v XX, especially in

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Speaker 1: the retail media, they're like, oh, don't touch this thing.

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Speaker 1: It's because it goes down. It's basically down since it

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Speaker 1: came out right. Always loses money long term. But when

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Speaker 1: it works, boy does at work. Right. So let's say

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Speaker 1: the markets down three percent, like it happened in August,

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Speaker 1: VIX spikes. V XX might go up right twelve, maybe

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Speaker 1: even more right, and that would be more than even

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Speaker 1: a negative triple leveraged inverse SNP, so like kind of

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Speaker 1: nothing goes up quite like a vix e TP on

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Speaker 1: those days. Are people buying them to capture that day

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Speaker 1: or are they just sort of holding it to hedge

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Speaker 1: their portfolio for a longer period. So that was the

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Speaker 1: initial concept, right exactly, that people would hold this thing

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Speaker 1: when they needed to to hedge out market risk UM.

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Speaker 1: But there you have major timing issues, right. It costs

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Speaker 1: money to be wrong on timing UM. And then you

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Speaker 1: have sort of position sizing issues. You don't know exactly

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Speaker 1: how much you need because you don't know exactly how

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Speaker 1: much mix is going to spike um. So so all

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Speaker 1: of these dynamics and maybe I'm preempting your your next

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Speaker 1: kind of where you're going, but lead to people looking

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Speaker 1: at the opposite traite right the short side, recently activity

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Speaker 1: that we have seen with regards to flows into the

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Speaker 1: long vix complex, it does look to be being used

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Speaker 1: as more kind of an opportunistic timing vehicle a k a.

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Speaker 1: As volatility has retreated recently during earning season and your

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Speaker 1: stocks making a renewed push towards all time highs. JP

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Speaker 1: Morgan's flag that you have had a large amount of

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Speaker 1: flows into these long VAWL products. And yet what this

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Speaker 1: does do, or what this does signal, is that, yes,

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Speaker 1: people are trying to use this opportunistically positioning for the spike,

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Speaker 1: but that when the spike happens, they're likely to monetize.

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Speaker 1: And so what does that do. That's selling pressure that

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Speaker 1: kind to put a lid on the spike. So it's

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Speaker 1: got it's a two way a fact, and it's a

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Speaker 1: nice kind of self regulating feedback loop when people do

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Speaker 1: use these appropriately. Yeah, I always seem vix E tps

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Speaker 1: like the guys selling the umbrellas outside of penstation when

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Speaker 1: it's raining. Um, everybody just the volume on them like

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Speaker 1: triples on a bad day. I mean clearly everybody is

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Speaker 1: like hitting those like it's like a frenzy. It's like

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Speaker 1: a feeding frenzy. And it's because they go up way

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Speaker 1: more than anything else. I mean, there, you don't you

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Speaker 1: get You just don't get that kind of juice elsewhere.

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Speaker 1: And is this part of the reason why VXX tracks

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Speaker 1: the short end of the curve right, which is closest

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Speaker 1: to the actual VIX There are other products attract the

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Speaker 1: whole All the futures were the middle part of the curve.

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Speaker 1: But people tend to not really want those. Is that

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Speaker 1: because they don't pop as much, but yet you don't

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Speaker 1: lose as much long term if you hold those. Yeah,

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Speaker 1: that's right generally speaking. So you have v x X

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Speaker 1: and v x right and UM tell you a quick story.

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Speaker 1: We had uh, like I said, started in an OH

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Speaker 1: six on this idea for v x X and are UM.

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Speaker 1: I came from Barclay's and our team was focused on

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Speaker 1: the front end of the curve and that would be

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Speaker 1: the most tradable UM in O eight, Barclay's essentially bought

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Speaker 1: what was what was left of Lehman right UM, which

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Speaker 1: included a team that was also working on a vix

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Speaker 1: E t N As it turned out, right, So we

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Speaker 1: got together and debated ideas, and they like the mid

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Speaker 1: term kind of concept and we thought, well, that doesn't

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Speaker 1: have enough juice for people are not gonna be as interested.

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Speaker 1: But their point was, you know, it's going to have

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Speaker 1: less decay over time. So he said, why don't we

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Speaker 1: launch them both and see what happens. And initially, actually

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Speaker 1: there was a m there was a lot of interest

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Speaker 1: in the v x C because I think some of

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Speaker 1: the more UM buy and hold type crowd viewed it

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Speaker 1: as a portfolio heads that they could sustain for longer

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Speaker 1: periods of time. Eventually most of the interests moved to

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Speaker 1: the front end of the curve. I think just because

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Speaker 1: you know, it's an unusual instrument, and if you're going

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Speaker 1: to tie up parts of your portfolio to hedge, you

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Speaker 1: kind of want the most bang for your buck. It's

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Speaker 1: not like you're putting big chunks of your portfolio this.

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Speaker 1: So talk to me a little bit about when you're

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Speaker 1: talking to the investors about how they're using the product,

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Speaker 1: and we talked about hedging a little bit here, like

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Speaker 1: how are especially institutional investors, how are they touching this

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Speaker 1: this product, and how long are they holding it for

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Speaker 1: and and uh at, you know what, what percentage of

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Speaker 1: the portfolio typically are they exposing to it? So I

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Speaker 1: think it's safe to say, across the years and across

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Speaker 1: the different types of clients, you really get a little

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Speaker 1: bit of everything UM. I would say that the institutions

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Speaker 1: these days UM that are trading these products have a

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Speaker 1: evoll focus or some aspect of their portfolio management includes

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Speaker 1: trading and options or volatility in some way, shape or

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Speaker 1: form um. You know, there's they're they're fluent in the waters. Basically, yeah,

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Speaker 1: they know what they're doing. They're using it in specific

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Speaker 1: ways for specific strategies. And then there's a whole contingent

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Speaker 1: that are doing arbitrage right among VIX related instruments, whether

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Speaker 1: they're E T p S or futures options and even

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Speaker 1: the sp and let me give you a number here.

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Speaker 1: So VXX currently has eight dred and sixty million, but

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Speaker 1: it trades about six million a day, so almost a

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Speaker 1: d percent of the assets are turned over. So in

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Speaker 1: our view, this is the right way that should be

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Speaker 1: used as a hot potato U S O. And there's

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Speaker 1: some others sometimes that have roll costs that track commodities

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Speaker 1: where they don't. You can see they're not traded that much,

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Speaker 1: and you wonder are people not getting what to do here?

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Speaker 1: But high turnover. This turnover would be scary if it

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Speaker 1: was a van guard et F but it's good here

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Speaker 1: because people are using a short term and that just

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Speaker 1: one quick thing before we go to the inverse fall

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Speaker 1: to get into E T S versus E T N S,

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Speaker 1: I just want to go back about ten years ago

350
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Speaker 1: ish I was in data covering this, and our job

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Speaker 1: was to put the e t F s on the terminal.

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Speaker 1: And you come along and you're like, we got this

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Speaker 1: e t N thing and it's like half note half

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Speaker 1: e t F half half. It's like half bond half equity.

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Speaker 1: And you guys pushed to put on the put it

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Speaker 1: on the equity key, and we had some high her

357
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Speaker 1: up saying no, it's a bond, it should be on

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Speaker 1: the fixed income key. It was a right call. Yeah,

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Speaker 1: I mean, you guys got it on equity. It's a

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Speaker 1: little high profile. But ultimately this speaks to the credit

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Speaker 1: risk of an e t N. Can you talk about that?

362
00:18:11,760 --> 00:18:15,000
Speaker 1: And also Lehman had one and they went bankrupt and

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Speaker 1: people didn't get all their money although there wasn't much

364
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Speaker 1: assets in it, right, right. So e t n s

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Speaker 1: are an obligation issued by a bank, right and they

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Speaker 1: have to be a certain tier bank. So that's why

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Speaker 1: you don't see sort of regional banks issuing e t

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Speaker 1: N s. Uh. They're significant requirements. And the sort of

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Speaker 1: pro and con of the e t N is that

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Speaker 1: the prospectus defines exactly what you're going to get, right,

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00:18:38,200 --> 00:18:41,960
Speaker 1: So if it's linked to an index, you have a formula. It's,

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Speaker 1: you know, sometimes an ugly formula, but it's there and

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Speaker 1: you can work out exactly what the E t N

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Speaker 1: is gonna pay out. The difference with an e t

375
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Speaker 1: F is that you're going to get what you get.

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Speaker 1: You know, hopefully the manager knows what he or she

377
00:18:53,880 --> 00:18:57,000
Speaker 1: is doing in tracks the index, maybe even outperforms UM.

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Speaker 1: But at the end of the day, if there's a

379
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Speaker 1: mistake made and it goes against you, sorry that you

380
00:19:01,280 --> 00:19:05,080
Speaker 1: know those are the results. So UM. The pro for

381
00:19:05,160 --> 00:19:07,600
Speaker 1: the E t N there is you know, the bank

382
00:19:07,720 --> 00:19:11,159
Speaker 1: mistracks the index, that's their problem, not yours, UM in

383
00:19:11,280 --> 00:19:14,560
Speaker 1: terms of the you know ny V of the product um.

384
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Speaker 1: But the con is you're reliant on them to do it.

385
00:19:17,800 --> 00:19:19,520
Speaker 1: So in other words, it's credit risk, and if the

386
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Speaker 1: bank goes away, then you're standing in line like all

387
00:19:22,800 --> 00:19:26,359
Speaker 1: the other creditors. There's also the tax issue because most

388
00:19:26,440 --> 00:19:29,639
Speaker 1: E t N assets right now, People might choose E

389
00:19:29,680 --> 00:19:31,560
Speaker 1: t F if they had an equal if it's all

390
00:19:31,680 --> 00:19:34,040
Speaker 1: all else equal, but E t N s that UM.

391
00:19:34,080 --> 00:19:36,640
Speaker 1: If it's futures, you get taxed a little differently if

392
00:19:36,640 --> 00:19:38,200
Speaker 1: you actually hold them, whereas an e t N you

393
00:19:38,240 --> 00:19:41,040
Speaker 1: don't actually hold them and you get taxed I guess normally, right.

394
00:19:41,080 --> 00:19:43,879
Speaker 1: That's another big reason people would go to the E

395
00:19:43,960 --> 00:19:46,520
Speaker 1: t N if there was an equivalent E t F. Yeah,

396
00:19:46,520 --> 00:19:49,240
Speaker 1: there's definitely tax differences, and in my experience, I found

397
00:19:49,280 --> 00:19:51,679
Speaker 1: people were not as concerned with that, especially with these

398
00:19:51,720 --> 00:19:54,399
Speaker 1: trading products where there's a short term time period. But

399
00:19:54,640 --> 00:19:58,240
Speaker 1: there are definitely tax differences depending on the asset class.

400
00:19:58,240 --> 00:20:00,399
Speaker 1: Two m LPs is one. We're not talking about that today,

401
00:20:00,440 --> 00:20:02,600
Speaker 1: but it's totally different with e tns and e t

402
00:20:02,760 --> 00:20:07,400
Speaker 1: f s. So we brought up inverse volatility briefly. Let's

403
00:20:07,400 --> 00:20:10,600
Speaker 1: come back to it. What is that? So back to

404
00:20:10,640 --> 00:20:15,960
Speaker 1: the idea that going along vix or volatility cost you something. Um,

405
00:20:16,160 --> 00:20:17,880
Speaker 1: you know, people started to say, well, wait a second,

406
00:20:17,880 --> 00:20:20,120
Speaker 1: if I go short, do I just you know, harvest

407
00:20:20,119 --> 00:20:23,080
Speaker 1: those benefits, and the short answers yes, right, so you can.

408
00:20:23,160 --> 00:20:25,760
Speaker 1: It's the same as selling options. You can receive option

409
00:20:25,840 --> 00:20:28,879
Speaker 1: premium and just you know, cross your fingers and hope

410
00:20:28,920 --> 00:20:31,520
Speaker 1: that those options expire worthless. You don't have to pay anything.

411
00:20:31,560 --> 00:20:33,320
Speaker 1: That's great, you know, great, but to make a living

412
00:20:34,040 --> 00:20:36,919
Speaker 1: until it's not right and um, something happens, you have

413
00:20:36,960 --> 00:20:40,879
Speaker 1: to pay out. So the short volatility trade express through

414
00:20:41,320 --> 00:20:46,000
Speaker 1: vix ETPs is essentially that UM just using the VIX

415
00:20:46,119 --> 00:20:48,239
Speaker 1: index and the futures on it as a proxy for

416
00:20:48,400 --> 00:20:51,800
Speaker 1: the overall volatility market. And how popular has that been

417
00:20:51,840 --> 00:20:54,800
Speaker 1: from a flow standpoint, It's been real popular. UM inverse

418
00:20:54,800 --> 00:20:57,159
Speaker 1: products were launched i think in two thousand ten for

419
00:20:57,160 --> 00:20:59,680
Speaker 1: the first time. Last years and launched x I V

420
00:20:59,880 --> 00:21:03,280
Speaker 1: and that have been some others by pro shares, etcetera. UM.

421
00:21:03,520 --> 00:21:06,520
Speaker 1: But also, and this is more difficult to calibrate, you know,

422
00:21:06,600 --> 00:21:08,919
Speaker 1: there's a certain proportion of the long products that are

423
00:21:08,960 --> 00:21:13,120
Speaker 1: actually just held for the short side UM, so they're

424
00:21:13,160 --> 00:21:16,000
Speaker 1: they're they're held by dealers as inventory who lend them

425
00:21:16,000 --> 00:21:17,800
Speaker 1: out to people who are shorting. So it's it's hard

426
00:21:17,840 --> 00:21:21,280
Speaker 1: to understand exactly what the numbers are. But certainly the

427
00:21:21,359 --> 00:21:25,960
Speaker 1: last several years, before you know, February of the short

428
00:21:26,000 --> 00:21:29,800
Speaker 1: ball trade was getting pretty popular. And why people would

429
00:21:29,840 --> 00:21:32,640
Speaker 1: choose to short a long ball et F rather than

430
00:21:32,680 --> 00:21:35,560
Speaker 1: hold a short ball et F will become pretty clear

431
00:21:35,600 --> 00:21:39,600
Speaker 1: as we continue this conversation. Because of as Greg said,

432
00:21:39,600 --> 00:21:42,560
Speaker 1: we're kind of we are in the prospectus and some

433
00:21:42,720 --> 00:21:45,760
Speaker 1: of the so called acceleration events where you can have

434
00:21:46,000 --> 00:21:49,920
Speaker 1: a short ball product go to zero in a day, Well,

435
00:21:50,000 --> 00:21:52,760
Speaker 1: that risk doesn't necessarily exist in the same fashion if

436
00:21:52,760 --> 00:21:55,400
Speaker 1: you're just shorting along vall E t F. So kind

437
00:21:55,400 --> 00:21:58,040
Speaker 1: of takes some dooms day out of it, but you know,

438
00:21:58,119 --> 00:22:00,960
Speaker 1: still doomsday when it happens. So let's actually there's the

439
00:22:00,960 --> 00:22:03,560
Speaker 1: opposite risk. I mean not opposite really, but it's a

440
00:22:03,560 --> 00:22:05,800
Speaker 1: continuation of the risk, right, because if you're shorting v

441
00:22:05,960 --> 00:22:08,600
Speaker 1: xx and it goes to infinity, then they you know,

442
00:22:08,600 --> 00:22:10,600
Speaker 1: they're going to call you up and say, hey, can

443
00:22:10,640 --> 00:22:14,360
Speaker 1: you kindly wire us a few more dollars um? Whereas

444
00:22:14,640 --> 00:22:16,840
Speaker 1: if you're long and inverse product, then yeah, I can

445
00:22:16,880 --> 00:22:19,200
Speaker 1: go to zero, but if it goes to negative numbers,

446
00:22:19,240 --> 00:22:22,320
Speaker 1: they don't call you up and and ask for that. Um,

447
00:22:22,600 --> 00:22:24,359
Speaker 1: let's talk about X I V. I have a chart

448
00:22:24,400 --> 00:22:28,000
Speaker 1: here showing I guess November it came out and then

449
00:22:28,080 --> 00:22:32,760
Speaker 1: up until the end of it returned. Sound about right,

450
00:22:32,920 --> 00:22:35,160
Speaker 1: It sounds about right. So this is this has always

451
00:22:35,200 --> 00:22:36,879
Speaker 1: been described as picking up Nichols in front of a

452
00:22:36,880 --> 00:22:38,680
Speaker 1: steam roller, but this is more like five dollar bills.

453
00:22:39,520 --> 00:22:42,920
Speaker 1: Because the FED had made volatility low, the market was great,

454
00:22:43,080 --> 00:22:45,800
Speaker 1: and it just worked and worked until it didn't. Now,

455
00:22:45,880 --> 00:22:50,240
Speaker 1: Luke take us through uh that faithful day in February.

456
00:22:50,520 --> 00:22:52,240
Speaker 1: So so this is fun and to kind of look

457
00:22:52,280 --> 00:22:56,360
Speaker 1: at the backdrop was pretty much the most tranquil year

458
00:22:56,440 --> 00:22:59,320
Speaker 1: for stocks on record that you could imagine. And yet

459
00:22:59,440 --> 00:23:01,399
Speaker 1: if you looked at the VIX futures curve, so the

460
00:23:01,440 --> 00:23:04,560
Speaker 1: spread between that first month and second month, that dynamic

461
00:23:04,600 --> 00:23:06,840
Speaker 1: you were describing earlier, where long vix et f s

462
00:23:06,960 --> 00:23:10,440
Speaker 1: are essentially you know, uh, buying high and selling low.

463
00:23:10,760 --> 00:23:14,640
Speaker 1: That's working uh in the complete opposite direction for shortfall

464
00:23:14,720 --> 00:23:17,200
Speaker 1: et f There was still a pretty nice contango there.

465
00:23:17,440 --> 00:23:21,520
Speaker 1: And yet realize volatility was sinking lower and lower and lower.

466
00:23:21,800 --> 00:23:24,280
Speaker 1: So you're making money on both greeks. You're making money

467
00:23:24,280 --> 00:23:26,480
Speaker 1: on your delta and you're making money on your data.

468
00:23:26,840 --> 00:23:30,440
Speaker 1: What happened in the run up in in in early

469
00:23:31,760 --> 00:23:35,439
Speaker 1: was that volatility got so low, you know, around to

470
00:23:35,520 --> 00:23:38,320
Speaker 1: a ten level on the VIX or even below. And

471
00:23:38,400 --> 00:23:40,960
Speaker 1: at the same time, the shape of that VIX futures curve,

472
00:23:41,240 --> 00:23:44,320
Speaker 1: it was very slim in terms of the front month

473
00:23:44,400 --> 00:23:47,960
Speaker 1: the second month contango. So your delta possibility of it

474
00:23:48,000 --> 00:23:51,399
Speaker 1: going even lower, of all going even lower probably you know,

475
00:23:51,520 --> 00:23:54,640
Speaker 1: not great and At the same time, the traditional kind

476
00:23:54,640 --> 00:23:57,280
Speaker 1: of decay money you're picking up from the structure of

477
00:23:57,280 --> 00:24:00,560
Speaker 1: the VIX futures curve no longer as supportive, and yet

478
00:24:00,680 --> 00:24:03,520
Speaker 1: people still loved it, and we're flooding into the product,

479
00:24:03,960 --> 00:24:07,200
Speaker 1: which brings us to February. Second, we have a pretty

480
00:24:07,200 --> 00:24:10,800
Speaker 1: hot non farms payroll report, and you know, people start

481
00:24:10,840 --> 00:24:13,600
Speaker 1: getting worried about inflation, People start getting worried about the

482
00:24:13,600 --> 00:24:16,240
Speaker 1: bond market yield sell at there's a new fed share

483
00:24:16,520 --> 00:24:19,120
Speaker 1: Oh yeah, oh geez. That was yeah, that long ago.

484
00:24:19,280 --> 00:24:21,560
Speaker 1: But yeah, we've we've got j Powell wondering if he's

485
00:24:21,560 --> 00:24:24,920
Speaker 1: going to be more hawkish. Big sell off that day

486
00:24:25,000 --> 00:24:29,400
Speaker 1: on a Friday that inverted the vic's futures curve, and

487
00:24:29,480 --> 00:24:32,560
Speaker 1: you know, some folks took that as Okay, it's time

488
00:24:32,600 --> 00:24:34,720
Speaker 1: to get out, it's time to sell, it's time to

489
00:24:34,760 --> 00:24:39,600
Speaker 1: be worried. Selling continues on that Monday, February five, which

490
00:24:39,880 --> 00:24:42,439
Speaker 1: you know Eric was who knows what Eric was doing then,

491
00:24:42,480 --> 00:24:44,240
Speaker 1: but he was not in the office when he was needed.

492
00:24:44,920 --> 00:24:47,320
Speaker 1: Let me let me tell you, and so about I

493
00:24:47,320 --> 00:24:50,439
Speaker 1: thinking about two, two or three pm. What happened was

494
00:24:50,600 --> 00:24:53,879
Speaker 1: s Vixie was which is another SHORTFOLI et F was

495
00:24:53,960 --> 00:24:58,120
Speaker 1: briefly halted, and what happened at that time was it's

496
00:24:58,119 --> 00:25:01,119
Speaker 1: almost like people and and eelers and anyone who is

497
00:25:01,160 --> 00:25:05,400
Speaker 1: hedging realized, oh my word, the amount of this VIC

498
00:25:05,520 --> 00:25:09,000
Speaker 1: spike and ensuing action we're going to get in futures,

499
00:25:09,760 --> 00:25:12,600
Speaker 1: how much I think stocks should sell off for this move.

500
00:25:12,680 --> 00:25:15,800
Speaker 1: This has not been adequately priced in at all. It's

501
00:25:15,800 --> 00:25:19,359
Speaker 1: like a dam burst and stocks started tumbling very hard.

502
00:25:19,600 --> 00:25:22,560
Speaker 1: And because of the way that these products are structured,

503
00:25:22,800 --> 00:25:26,359
Speaker 1: the VIC spike lower stocks meant that from four to

504
00:25:26,440 --> 00:25:29,520
Speaker 1: four or fifteen and their rebalancing activity there was going

505
00:25:29,560 --> 00:25:32,200
Speaker 1: to be a heavy, heavy, heavy amount to buy that's

506
00:25:32,200 --> 00:25:35,240
Speaker 1: going to push volatility up further. So it's it's essentially

507
00:25:35,240 --> 00:25:37,119
Speaker 1: gets to be a point where people are front running

508
00:25:37,119 --> 00:25:39,320
Speaker 1: something they know is going to happen in terms of

509
00:25:39,320 --> 00:25:42,560
Speaker 1: the VIC spike because of the mechanism and the popularity

510
00:25:42,560 --> 00:25:45,280
Speaker 1: of these products, that continuing to get out of ahead

511
00:25:45,280 --> 00:25:47,800
Speaker 1: of itself and cycle and cycle and cycle, and so

512
00:25:47,840 --> 00:25:51,080
Speaker 1: what ended up happening is x I V Bay had

513
00:25:51,119 --> 00:25:54,359
Speaker 1: an acceleration event which was very well defined in the prospectives,

514
00:25:54,400 --> 00:25:56,639
Speaker 1: and that you know, if the indicative value of the

515
00:25:56,680 --> 00:25:58,800
Speaker 1: product was down by I think, you know, more than

516
00:25:58,960 --> 00:26:02,240
Speaker 1: six in a day lost at the sixty in the

517
00:26:02,320 --> 00:26:04,560
Speaker 1: day that it would be you know, possible and within

518
00:26:04,640 --> 00:26:07,400
Speaker 1: the the issuers rights to just close up the note.

519
00:26:07,440 --> 00:26:10,440
Speaker 1: And that's what happened. First of all, I was off

520
00:26:10,480 --> 00:26:12,200
Speaker 1: that day because the Eagles had won the Super Bowl

521
00:26:12,240 --> 00:26:14,120
Speaker 1: the day before, and I purposely took off to watch

522
00:26:14,200 --> 00:26:16,280
Speaker 1: all the sports shows and just like revel in it. Plus,

523
00:26:16,280 --> 00:26:18,439
Speaker 1: I was out late and I got a call from

524
00:26:18,520 --> 00:26:20,640
Speaker 1: Luke at like three thirty. I remember I was in Mike.

525
00:26:20,800 --> 00:26:22,080
Speaker 1: I went to with my wife to pick up my

526
00:26:22,119 --> 00:26:23,760
Speaker 1: kid from school. When I was in the passenger seat,

527
00:26:24,080 --> 00:26:25,680
Speaker 1: He's like, what's going on with X I V. And

528
00:26:25,680 --> 00:26:27,720
Speaker 1: I'm like, what do you mean. He's like, it's crapped out.

529
00:26:27,840 --> 00:26:30,840
Speaker 1: I'm like, oh no, And that was the technical term. Yeah,

530
00:26:30,880 --> 00:26:32,960
Speaker 1: I think that was something like that. UM. It was

531
00:26:33,040 --> 00:26:37,320
Speaker 1: much more sophisticated UM. And the whole week I remember

532
00:26:37,400 --> 00:26:39,080
Speaker 1: it was like a big deal. It was like in

533
00:26:39,080 --> 00:26:41,440
Speaker 1: the New York Times, the Wall Street Journal. Now X

534
00:26:41,480 --> 00:26:43,680
Speaker 1: if you only had about eight hundred million dollars, maybe

535
00:26:43,680 --> 00:26:45,760
Speaker 1: close to a billion, it wasn't a ton of money,

536
00:26:45,760 --> 00:26:48,240
Speaker 1: but it X I V. Was like the tip of

537
00:26:48,240 --> 00:26:50,360
Speaker 1: an Iceberg of a larger trade. A lot of people

538
00:26:50,400 --> 00:26:52,679
Speaker 1: are shortfall just doing it the regular way without the

539
00:26:52,720 --> 00:26:55,960
Speaker 1: et P right, and this is sort of everybody. It

540
00:26:56,000 --> 00:26:58,960
Speaker 1: was an easy trade that got crowded and blew up basically,

541
00:26:59,080 --> 00:27:01,119
Speaker 1: and Gregg, what were doing. I was sitting in my

542
00:27:01,160 --> 00:27:03,400
Speaker 1: office and we were watching it too. We had some

543
00:27:03,480 --> 00:27:06,880
Speaker 1: small vixed funds at my new shop, rex shares Um,

544
00:27:07,119 --> 00:27:10,080
Speaker 1: and we were definitely paying attention to what was going on.

545
00:27:10,600 --> 00:27:13,520
Speaker 1: But you know, and and I'm you know, I guess

546
00:27:13,560 --> 00:27:17,040
Speaker 1: semi proud to say it. I bought volatility uh you know,

547
00:27:17,240 --> 00:27:21,080
Speaker 1: the I should say, I bought the inverse volatility um

548
00:27:21,080 --> 00:27:24,360
Speaker 1: fund our fund that afternoon because I thought this thing

549
00:27:24,400 --> 00:27:27,560
Speaker 1: was overdone. What happened between four and four fifteen I

550
00:27:27,600 --> 00:27:29,919
Speaker 1: think was at least for me and a lot of

551
00:27:29,960 --> 00:27:33,040
Speaker 1: market participants that were watching the space really kind of

552
00:27:33,040 --> 00:27:35,600
Speaker 1: the nail in the coffin of Wow, this thing really

553
00:27:35,600 --> 00:27:39,280
Speaker 1: got away from everyone, which it obviously never happened before,

554
00:27:39,560 --> 00:27:42,400
Speaker 1: even though moves of that size had happened before. How

555
00:27:42,440 --> 00:27:45,160
Speaker 1: often do you eat your own cooking like that? Why

556
00:27:45,200 --> 00:27:49,000
Speaker 1: cook unless you're willing to eat it? Um so from

557
00:27:49,000 --> 00:27:52,600
Speaker 1: time to time, and so obviously this was a big,

558
00:27:52,720 --> 00:27:56,159
Speaker 1: big event. We quickly I had this idea for a

559
00:27:56,240 --> 00:27:58,600
Speaker 1: rating system for ETFs anyway like movies, so we quickly

560
00:27:58,640 --> 00:28:01,120
Speaker 1: pushed this out. All these get like a red light

561
00:28:01,560 --> 00:28:04,040
Speaker 1: sort of leveraged um. But this got calls for like

562
00:28:04,040 --> 00:28:06,840
Speaker 1: should E T F? Should should these be like not allowed?

563
00:28:06,920 --> 00:28:08,640
Speaker 1: And it seems like it's all kind of died down.

564
00:28:08,680 --> 00:28:13,040
Speaker 1: It does seem though, that the short vall complex pretty much,

565
00:28:13,560 --> 00:28:15,560
Speaker 1: you know, kind of got neutered right S S V

566
00:28:15,720 --> 00:28:18,879
Speaker 1: x Y went to what half inverse, so it's not

567
00:28:18,960 --> 00:28:21,960
Speaker 1: quite the same trade. And then z I V still exists,

568
00:28:21,960 --> 00:28:24,400
Speaker 1: which is shorting the middle of the curve. But it's

569
00:28:24,400 --> 00:28:27,920
Speaker 1: interesting nobody wants these products like they've made decent money,

570
00:28:27,960 --> 00:28:30,399
Speaker 1: but that nobody cares like it was like they just

571
00:28:30,440 --> 00:28:33,359
Speaker 1: don't have enough. Is it this juice issue again? It

572
00:28:33,440 --> 00:28:36,440
Speaker 1: must be, you know, I don't I don't understand why

573
00:28:36,560 --> 00:28:38,760
Speaker 1: that is. I I think products like z I V

574
00:28:39,000 --> 00:28:41,320
Speaker 1: for example, are are great. I mean, it's it's a

575
00:28:41,360 --> 00:28:45,320
Speaker 1: more conservative approach, but you know, it's less likely to

576
00:28:45,320 --> 00:28:47,600
Speaker 1: have one of those events. And Luke Um, you're on

577
00:28:47,640 --> 00:28:49,040
Speaker 1: Twitter a lot as I am. Can you talk a

578
00:28:49,080 --> 00:28:52,120
Speaker 1: little bit about the the Twitter sort of outrage, but

579
00:28:52,160 --> 00:28:55,040
Speaker 1: then also the sort of mixed e motions people have

580
00:28:55,080 --> 00:28:57,200
Speaker 1: about x I V not not being there, and now

581
00:28:57,360 --> 00:28:59,680
Speaker 1: I put a pull out, like half the people seem

582
00:28:59,720 --> 00:29:01,360
Speaker 1: to want a new one back. Can you just talk

583
00:29:01,400 --> 00:29:05,600
Speaker 1: about the what people out there uh felt about x

584
00:29:05,640 --> 00:29:08,520
Speaker 1: I V. So people on the internet, people who are

585
00:29:08,520 --> 00:29:11,960
Speaker 1: extremely online, absolutely loved x I V. If you went

586
00:29:12,040 --> 00:29:16,000
Speaker 1: to our Wall Street bets, like the subreddit for you know,

587
00:29:16,280 --> 00:29:20,040
Speaker 1: essentially pajama traders, they all love this thing. They were

588
00:29:20,080 --> 00:29:22,880
Speaker 1: all very crazy, long long and holding x I V

589
00:29:23,080 --> 00:29:25,520
Speaker 1: like you know you shouldn't be, but apparently too many

590
00:29:25,520 --> 00:29:28,720
Speaker 1: people were, and the thirst is still there because I

591
00:29:28,720 --> 00:29:31,120
Speaker 1: I think people are just very much attracted to that

592
00:29:31,280 --> 00:29:35,120
Speaker 1: shiny object, to the kind of democratization of the ball space.

593
00:29:35,200 --> 00:29:36,640
Speaker 1: I think it also, you know, makes a lot of

594
00:29:36,680 --> 00:29:39,720
Speaker 1: sense in a very low yield environment that this, you know,

595
00:29:40,000 --> 00:29:43,520
Speaker 1: was for a long time a reliable source of carry

596
00:29:43,600 --> 00:29:46,360
Speaker 1: until it wasn't. And like the question I would have

597
00:29:46,360 --> 00:29:49,000
Speaker 1: for for Greg on this is then you know, if

598
00:29:49,280 --> 00:29:52,440
Speaker 1: x I V were to be revived or launched in

599
00:29:52,480 --> 00:29:56,680
Speaker 1: another form today, do you think what steps would be needed?

600
00:29:56,720 --> 00:29:59,280
Speaker 1: Do you think to appease regulators or could you just

601
00:29:59,720 --> 00:30:03,000
Speaker 1: do in the same form. I to my knowledge, some

602
00:30:03,280 --> 00:30:05,160
Speaker 1: you know, a bank could just issue another X I

603
00:30:05,240 --> 00:30:07,240
Speaker 1: V tomorrow if they wanted to. I don't think there's

604
00:30:07,280 --> 00:30:10,560
Speaker 1: anything to to stop that. I think what's happened is

605
00:30:10,640 --> 00:30:12,800
Speaker 1: back to the risk people we were talking about at

606
00:30:12,840 --> 00:30:16,960
Speaker 1: the beginning. Um, you know, something is a three sigmatic

607
00:30:17,040 --> 00:30:19,479
Speaker 1: sigma event until until one of those happens, and then

608
00:30:19,480 --> 00:30:22,280
Speaker 1: all of a sudden you move your you know, your volatility,

609
00:30:22,280 --> 00:30:25,920
Speaker 1: of your volatility around and so this this couldn't happen

610
00:30:26,000 --> 00:30:27,960
Speaker 1: until it did. Now it can. So you've got to

611
00:30:28,000 --> 00:30:29,920
Speaker 1: think about that when you're creating new products. And I

612
00:30:29,920 --> 00:30:32,760
Speaker 1: think that's why the existing products were levered down. I

613
00:30:32,800 --> 00:30:36,160
Speaker 1: know that prime brokers, you know, increased limits on margins

614
00:30:36,160 --> 00:30:39,200
Speaker 1: and things. So it all kind of cascades through. Um,

615
00:30:39,280 --> 00:30:42,160
Speaker 1: you know, back to seven that crash. You know, people

616
00:30:42,280 --> 00:30:44,560
Speaker 1: still refer to that because it's the biggest move we had.

617
00:30:45,280 --> 00:30:47,720
Speaker 1: But if that had never happened, we'd be referring to something,

618
00:30:47,840 --> 00:30:50,600
Speaker 1: you know, half the size and scaling everything down and

619
00:30:50,640 --> 00:30:53,560
Speaker 1: we might not have exchange products. UM. And just one

620
00:30:53,600 --> 00:30:56,280
Speaker 1: thing on X I V, which is interesting. We look,

621
00:30:56,720 --> 00:30:59,960
Speaker 1: x I V made more money for people than it lost,

622
00:31:00,080 --> 00:31:02,000
Speaker 1: Like on that day it might have lost eight hundred million,

623
00:31:02,000 --> 00:31:04,400
Speaker 1: which was what was in it, But over the years

624
00:31:04,400 --> 00:31:07,280
Speaker 1: it saw a couple of billion and outflows, meaning that

625
00:31:07,360 --> 00:31:10,480
Speaker 1: people were taking their profits over and over, which is

626
00:31:10,480 --> 00:31:12,880
Speaker 1: sort of what you should do. Not saying everybody to that,

627
00:31:13,240 --> 00:31:15,760
Speaker 1: but that's an interesting point. On the flip. V xx

628
00:31:15,800 --> 00:31:18,040
Speaker 1: has about eight million, but it's taking it about seven

629
00:31:18,080 --> 00:31:20,280
Speaker 1: billion dollars worth of flows in his lifetime. But that's

630
00:31:20,320 --> 00:31:23,000
Speaker 1: I guess arguably more like you're buying insurance. But the cheeky,

631
00:31:23,240 --> 00:31:26,200
Speaker 1: the cheeky argument to make is that v x X

632
00:31:26,320 --> 00:31:28,000
Speaker 1: as a buy and hold has lost you more than

633
00:31:28,160 --> 00:31:31,040
Speaker 1: x I V, even though x I V closed easily

634
00:31:31,360 --> 00:31:33,960
Speaker 1: if you have about and held both. Yeah, but the

635
00:31:34,040 --> 00:31:36,120
Speaker 1: idea of x I V though, was that you would

636
00:31:36,160 --> 00:31:38,880
Speaker 1: take profits and not just hold it like and be

637
00:31:38,960 --> 00:31:41,400
Speaker 1: like naive. That would go up forever. But again, I

638
00:31:41,400 --> 00:31:43,000
Speaker 1: think that there was an article in New York Times

639
00:31:43,040 --> 00:31:45,480
Speaker 1: about a target manager doing the short ball trade, and

640
00:31:45,520 --> 00:31:47,960
Speaker 1: I think that's when it got labeled as Okay, Grandma's

641
00:31:48,000 --> 00:31:50,240
Speaker 1: in this. Even though that might have not been, it

642
00:31:50,320 --> 00:31:53,400
Speaker 1: still ran for months and months after that, and surprisingly

643
00:31:53,440 --> 00:31:55,680
Speaker 1: Seth Golden I saw he's that target manager I still

644
00:31:55,720 --> 00:32:00,160
Speaker 1: talked all he is still trading and in trading options,

645
00:32:00,160 --> 00:32:01,960
Speaker 1: so he was he got over it. He was like, yeah,

646
00:32:02,000 --> 00:32:06,560
Speaker 1: it was fine. I'm good merely as so bring us

647
00:32:06,600 --> 00:32:09,080
Speaker 1: up to speed on what you're doing now. So I

648
00:32:09,080 --> 00:32:12,120
Speaker 1: started a firm called rex Shares. You refer to microsectors,

649
00:32:12,160 --> 00:32:14,680
Speaker 1: which is one of our product lines. We we do

650
00:32:14,960 --> 00:32:19,440
Speaker 1: um leverage sector plays. So we have a product with

651
00:32:20,040 --> 00:32:23,160
Speaker 1: the n y C that's a link to Fang stocks.

652
00:32:23,240 --> 00:32:25,640
Speaker 1: So people love trading Fang stocks and they're kind of

653
00:32:25,800 --> 00:32:29,120
Speaker 1: pure play on tech. Uh. Three times lever f n

654
00:32:29,160 --> 00:32:31,840
Speaker 1: g U fungu, which apparently I'm not supposed to say

655
00:32:31,840 --> 00:32:33,520
Speaker 1: on the air because it sounds like some you know,

656
00:32:33,600 --> 00:32:37,320
Speaker 1: bad phrase in Italian or something. Um, but f n

657
00:32:37,360 --> 00:32:39,719
Speaker 1: g U is is like our main product. And then

658
00:32:39,760 --> 00:32:43,320
Speaker 1: we've got a number of different sector plays, a fanged

659
00:32:43,480 --> 00:32:45,800
Speaker 1: fanged f n g D, which I think will have

660
00:32:45,840 --> 00:32:49,440
Speaker 1: its day in the sun because the Fang trade, Um,

661
00:32:49,600 --> 00:32:51,760
Speaker 1: I mean it's not totally great now, but it's been

662
00:32:51,800 --> 00:32:55,280
Speaker 1: so good for so long. This is triple leveraged Fang

663
00:32:55,560 --> 00:33:02,040
Speaker 1: plus tesla um some other I do. I'll yeah, Twitter

664
00:33:02,200 --> 00:33:04,600
Speaker 1: and basically all the companies that have led this market,

665
00:33:04,640 --> 00:33:06,600
Speaker 1: like the tip of the spear of tech in a way,

666
00:33:06,920 --> 00:33:09,680
Speaker 1: it just isolates those to be clear that when you're

667
00:33:09,680 --> 00:33:11,880
Speaker 1: talking about is the inverse right. So that's what I'm

668
00:33:11,880 --> 00:33:13,920
Speaker 1: saying you is the is up and f g D

669
00:33:14,040 --> 00:33:16,320
Speaker 1: is the down. Um. I just think f m g

670
00:33:16,480 --> 00:33:18,400
Speaker 1: D is one of those that will have its day

671
00:33:19,120 --> 00:33:21,440
Speaker 1: because obviously these stocks are up so much in the

672
00:33:21,480 --> 00:33:24,800
Speaker 1: past ten years. Greg King, Luke Kawen, thanks for joining

673
00:33:24,840 --> 00:33:31,840
Speaker 1: us on Trillians. Always pleasure great to be here. Thanks

674
00:33:31,840 --> 00:33:34,120
Speaker 1: for listening to Trillions until next time. You can find

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00:33:34,160 --> 00:33:38,240
Speaker 1: us on the Bloomberg terminal, Bloomberg dot com, Apple Podcast, Spotify,

676
00:33:38,680 --> 00:33:41,040
Speaker 1: or wherever else you'd like to listen. We'd love to

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00:33:41,080 --> 00:33:44,120
Speaker 1: hear female. We're on Twitter. I'm at Joel Webber Show,

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00:33:44,240 --> 00:33:48,360
Speaker 1: He's at Eric Faltunas. You can follow Luke at l

679
00:33:48,760 --> 00:33:52,720
Speaker 1: j K A w A, and you can follow Greg

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00:33:52,920 --> 00:33:58,560
Speaker 1: at m Sectors. Trillions is produced by Magnus Hendrickson. Francesca

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00:33:58,640 --> 00:34:00,960
Speaker 1: Levy is the head of Bloomberg podcast by