WEBVTT - Lots More on How TikTok Options Traders Got Quiet 0:00:02.480 --> 0:00:07.080 Bloomberg Audio Studios, Podcasts, radio news. 0:00:07.600 --> 0:00:09.639 Tracy, we have been in a leather jacket. 0:00:10.119 --> 0:00:13.160 Yeah, well it's not just a leather jacket. It's a 0:00:13.240 --> 0:00:17.360 black leather blazer with sort of braided edges. It's got 0:00:17.360 --> 0:00:19.800 a little bit of a wait, is this an insult 0:00:19.880 --> 0:00:21.200 or a compliment? I don't know, a little bit of 0:00:21.200 --> 0:00:23.240 a little bit of a Ren fair Field. 0:00:23.760 --> 0:00:27.200 Absolutely, that's a big to a volatility nerd. That's a couple. 0:00:27.400 --> 0:00:29.200 Okay, good, all right. I was a question. 0:00:29.320 --> 0:00:30.639 This is like one of it that would be a 0:00:30.760 --> 0:00:34.120 very polarizing not to me. 0:00:34.320 --> 0:00:37.239 I do not have renfair vibes. But look, I respect it. 0:00:37.440 --> 0:00:41.559 These are renfair time, These are fair times. I get it. 0:00:41.600 --> 0:00:41.960 I get it. 0:00:42.120 --> 0:00:44.559 Absolutely. There's pictures of me on Twitter in you know, 0:00:44.680 --> 0:00:47.199 Nightingale armor with his swords, So I think this is 0:00:47.200 --> 0:00:47.800 a fair game. 0:00:50.680 --> 0:00:51.519 I did a deadlist. 0:00:51.640 --> 0:00:55.160 I'm both the most popular trader and most successful trader 0:00:55.360 --> 0:00:58.360 at Citadel. That is going viral, barges. 0:00:58.480 --> 0:00:59.720 This isn't after school special. 0:01:00.280 --> 0:01:02.800 I've decided I'm going to base my entire personality going 0:01:02.840 --> 0:01:05.680 forward on campaigning for a strategic pork reserve in the 0:01:05.800 --> 0:01:09.319 US Black Goal. These are the important questions that robots 0:01:09.360 --> 0:01:10.120 taking over the world. 0:01:10.200 --> 0:01:13.040 No, I think that like in a couple of years, 0:01:13.240 --> 0:01:15.520 the AI will do a really good job of making 0:01:15.520 --> 0:01:18.520 the Odd lotch podcast. One day that person will have 0:01:18.560 --> 0:01:19.600 the mandate of heaven. 0:01:19.800 --> 0:01:22.040 How do I get more popular and successful? 0:01:22.319 --> 0:01:23.200 We do have. 0:01:25.520 --> 0:01:27.840 You're listening to lots More where we catch up with 0:01:27.880 --> 0:01:30.600 friends about what's going on right now, because. 0:01:30.400 --> 0:01:33.280 Even when the Odd Lots is over, there's always lots More. 0:01:33.680 --> 0:01:35.880 And we really do have the perfect guest. 0:01:39.280 --> 0:01:43.280 We are, of course with Ben Eiffer qv R Advisors. 0:01:43.400 --> 0:01:46.680 Then who's been getting steamrolled the most by this market? 0:01:46.720 --> 0:01:48.280 And I have some thoughts on this market, but I 0:01:48.280 --> 0:01:49.160 want to hear your No. 0:01:49.520 --> 0:01:51.560 It's a super fun market. I mean really, First you 0:01:51.640 --> 0:01:54.000 had the deep seak thing, yeah, right, and that was 0:01:54.040 --> 0:01:57.480 really interesting because equity markets went down, but the fund 0:01:57.520 --> 0:01:59.440 was all under the surface, right, what did we sell 0:01:59.440 --> 0:02:01.120 off eight or ten percent? And index? It wasn't a 0:02:01.160 --> 0:02:04.480 huge deal, but there were like eight standard deviation moves 0:02:04.560 --> 0:02:08.560 in market, neutral factor type relationships and crowded equity long 0:02:08.560 --> 0:02:11.120 short and so you saw you know the type of 0:02:11.160 --> 0:02:15.520 people that had the really popular equity positions. You'll Nvidia 0:02:15.800 --> 0:02:18.480 and you know Tesla and all these kind of stocks 0:02:18.520 --> 0:02:20.919 just get really really murdered. You heard of a lot 0:02:20.919 --> 0:02:22.640 of pain at the big multistrats. Again you have to 0:02:22.639 --> 0:02:24.760 put that in context because they're pretty well risk managed. 0:02:24.760 --> 0:02:27.200 The losses weren't that large in percent terms, but you 0:02:27.240 --> 0:02:30.120 had again just very very very large moves. And then 0:02:30.320 --> 0:02:32.480 I think the interesting thing about that was that led 0:02:32.520 --> 0:02:35.600 to a lot of d risking in hedge funds. So 0:02:35.760 --> 0:02:39.160 you had pretty high gross in net leverage coming into 0:02:39.200 --> 0:02:42.000 that and then it came off quite a lot, you know, 0:02:42.000 --> 0:02:44.680 a lot of d risking. And then when you know 0:02:44.720 --> 0:02:48.079 that when Liberation Day hit, I think positioning wasn't nearly 0:02:48.160 --> 0:02:50.720 as you know, as offsides as it could have been otherwise. 0:02:51.280 --> 0:02:54.239 And so you did see obviously big drawdowns in the 0:02:54.280 --> 0:02:57.079 equity market and big rallies back a lot of volatility, 0:02:57.360 --> 0:02:59.320 but I think, you know, the losses that you saw 0:02:59.360 --> 0:03:01.519 among head funds probably weren't as bad as they would 0:03:01.560 --> 0:03:04.480 have been otherwise. Another interesting thing to note, and we 0:03:04.480 --> 0:03:07.160 you know, we talked about this a lot. There really 0:03:07.280 --> 0:03:11.919 isn't that much of the kind of super crowded short volatility, 0:03:12.040 --> 0:03:14.880 short tail risk, tail risk selling kind of stuff out 0:03:14.919 --> 0:03:17.400 there that there was, like in twenty nineteen twenty twenty 0:03:17.400 --> 0:03:19.680 for the pandemic. So you didn't see that those kind 0:03:19.720 --> 0:03:22.600 of fireworks right there. Weren't like hedge funds getting liquidated 0:03:22.639 --> 0:03:25.000 and people getting carried out in body bags and big 0:03:25.040 --> 0:03:27.560 auctions of all their positions making markets go crazy. You 0:03:27.600 --> 0:03:29.520 just didn't really have that kind of stuff. What you 0:03:29.560 --> 0:03:33.440 had was a pretty fundamentally driven, you know, orderly sell off, 0:03:33.440 --> 0:03:36.080 followed by you know, goofy rallies back and forth on 0:03:36.120 --> 0:03:37.680 Trump tweets and what's he going to do and all 0:03:37.720 --> 0:03:39.400 this kind of thing. But it was really, I think 0:03:39.480 --> 0:03:43.480 much more about about you know, fundamentals of expectations of 0:03:43.520 --> 0:03:45.680 what is policy really actually going to be and how 0:03:45.760 --> 0:03:47.840 much does that matter for the economy as opposed to 0:03:47.920 --> 0:03:51.880 like technical positioning hedge fund blow ups and people getting steamrolled. 0:03:52.040 --> 0:03:54.800 Yeah, I feel like the positioning point is really important 0:03:54.880 --> 0:03:57.240 and is probably one of the reasons like we had, 0:03:57.640 --> 0:04:01.400 I'm doing air quotes here, but that orderly sell off 0:04:01.520 --> 0:04:04.760 versus something super super chaotic. But that said, I mean 0:04:04.760 --> 0:04:06.800 we're talking about it being a fun market. I feel 0:04:06.800 --> 0:04:08.800 like I have to make the obvious disclaimer, which is, 0:04:09.160 --> 0:04:11.400 I'm sure it's very fun if you're in options and 0:04:11.440 --> 0:04:14.000 in volatility trading. But if you're in the sort of 0:04:14.040 --> 0:04:17.719 long term buy and hold game, this feels almost like 0:04:18.160 --> 0:04:21.760 an impossible environment to navigate, right, Like one day we're 0:04:21.839 --> 0:04:23.760 up two or three percent, the next day we're down 0:04:23.800 --> 0:04:26.919 two or three percent. Everything is riding on like what 0:04:27.000 --> 0:04:30.560 Scott Besson says, what Lutnik chooses to say, and god knows, 0:04:30.640 --> 0:04:32.120 you know what Trump is going to say in his 0:04:32.240 --> 0:04:34.000 latest press conference very much so. 0:04:34.120 --> 0:04:36.040 And you know, and in today too, it's like, well, 0:04:36.120 --> 0:04:38.280 yesterday we were up three point two percent and then 0:04:38.360 --> 0:04:41.320 there was a bunch of walking back of the unilateral 0:04:41.400 --> 0:04:43.599 terra production position, and then we sold off, you know, 0:04:43.640 --> 0:04:46.400 halfway back to flat almost immediately. I think there were 0:04:46.440 --> 0:04:47.280 I think someone. 0:04:47.080 --> 0:04:49.720 By the way, we're recording this April twenty fourth, it's 0:04:49.800 --> 0:04:50.719 ten oh eight am. 0:04:50.839 --> 0:04:52.480 Every time we have a Yesterday. 0:04:52.120 --> 0:04:55.000 Or something that's right, very good point, keep going yeap, 0:04:55.080 --> 0:04:57.520 So we had I think just this morning I saw 0:04:57.560 --> 0:04:59.960 an article I think Alexander wrote it at Bloomberg saying, 0:05:00.080 --> 0:05:02.839 you know, we're in a traders are trying to trade 0:05:02.880 --> 0:05:05.880 Trump tweet's market, and that's really hard. You know. I 0:05:05.920 --> 0:05:09.320 think that generally speaking, anybody that you talk to the 0:05:09.400 --> 0:05:12.080 success rate of sitting there at your computer and looking 0:05:12.120 --> 0:05:14.200 at what just got tweeted or what article just came out, 0:05:14.240 --> 0:05:16.240 and then sort of doing trades and making money, Like 0:05:16.279 --> 0:05:18.960 nobody makes money at that. It's incredibly difficult, right, It's 0:05:18.960 --> 0:05:21.359 a very choppy market. The people who do, of course, 0:05:21.440 --> 0:05:23.520 as you point it out, volatility traders have a very 0:05:23.560 --> 0:05:26.479 non consensus view on what's fun and what's not right. 0:05:26.520 --> 0:05:27.839 We love this, but yeah, I think that's. 0:05:27.800 --> 0:05:29.760 Your definitions of fun may vary. 0:05:30.000 --> 0:05:31.760 Exactly back to the renaissance fair point. 0:05:32.440 --> 0:05:34.720 So, I thought there was a very interesting point about 0:05:34.760 --> 0:05:38.520 deep seek, which is that what it really obliterated were 0:05:38.560 --> 0:05:41.280 the market neutral factors that had been working on. That 0:05:41.440 --> 0:05:43.520 is very interesting, And of course, you know the pod 0:05:43.560 --> 0:05:46.320 shops that we're always talking about, their game is to 0:05:46.360 --> 0:05:49.040 find those market neutral and then this was a thing 0:05:49.080 --> 0:05:50.320 that just rearranged everything. 0:05:50.839 --> 0:05:52.000 You know, when you're on. 0:05:52.000 --> 0:05:55.960 Before you talk about the TikTok option influencers who are 0:05:56.040 --> 0:06:00.360 always looking at various Greek letters like alpha, beta, Gamma, delta, 0:06:00.400 --> 0:06:05.840 Epsilon's zeta, ata, theta iota, Kappa, lambdamu when oopsilon is 0:06:05.960 --> 0:06:10.359 trading way out there on some extreme all these trades 0:06:10.480 --> 0:06:13.400 are premised on some sort of mean reversion that there 0:06:13.480 --> 0:06:17.720 isn't a dislocation, and then eventually a normal returns, right. 0:06:17.800 --> 0:06:20.320 And it may go further out and the sigma and 0:06:20.400 --> 0:06:22.760 the row may get further blown out, but eventually they 0:06:22.839 --> 0:06:25.120 come back to normal. How much of this is like 0:06:25.200 --> 0:06:29.120 a crisis of people really don't know that some sort 0:06:29.160 --> 0:06:31.599 of fundamental economic mean reversion is coming. 0:06:32.000 --> 0:06:34.120 Yeah, I think that's something really important to that, right. 0:06:34.200 --> 0:06:37.239 I think that people are very conditioned in this market 0:06:37.320 --> 0:06:39.960 of the last many many years, really post credit crisis, right, 0:06:40.080 --> 0:06:43.080 that that sort of nothing ever happens. We talk about 0:06:43.120 --> 0:06:45.000 this a lot, right, but that any kind of sell 0:06:45.040 --> 0:06:47.840 off will be immediately bought, It'll immediately come back, any 0:06:47.920 --> 0:06:50.280 kind of all spike will get sold. And you know, 0:06:50.400 --> 0:06:52.920 even in the pandemic, obviously people got run over on 0:06:53.000 --> 0:06:54.800 that view, but we still did come back. It's just 0:06:54.839 --> 0:06:56.719 that it got really crazy for like a month, right, Yeah. 0:06:56.839 --> 0:06:59.159 And I think this feels very different, where this isn't 0:06:59.560 --> 0:07:01.880 a flat in the pan with a technical squeeze and 0:07:01.920 --> 0:07:03.440 a big explosion of stuff like this is. You know, 0:07:03.480 --> 0:07:06.080 there are the real fundamental issues here, which is that 0:07:06.480 --> 0:07:09.840 you know, the US government is out there doing totally 0:07:10.040 --> 0:07:13.000 crazy economic policy that every economist in the world for 0:07:13.080 --> 0:07:15.440 the most part, will tell you is totally crazy. And 0:07:15.760 --> 0:07:18.080 they're also changing the goalposts day to day on what 0:07:18.160 --> 0:07:20.920 exactly that policy is going to be, and they've really 0:07:21.040 --> 0:07:23.880 eroded the market's confidence that they kind of know what 0:07:23.960 --> 0:07:25.720 they're doing, not only on tariffs, but I think on 0:07:25.800 --> 0:07:27.080 everything else now, right, I think that one of the 0:07:27.120 --> 0:07:30.240 most important things that Liberation Day did was, you know, 0:07:30.400 --> 0:07:32.360 take the market, which really up to that point, I 0:07:32.400 --> 0:07:34.880 think you have to say, kind of believed that the 0:07:35.000 --> 0:07:37.640 tariffs thing was like this four dimensional chess strategy and 0:07:37.720 --> 0:07:40.480 negotiation and everything else crazy that Trump was saying, you 0:07:40.600 --> 0:07:42.840 kind of discount, right, because he's not really going to 0:07:42.880 --> 0:07:44.960 do that. He's got a plan. And really the market 0:07:45.040 --> 0:07:47.240 really had to re rate that whole expectations of how 0:07:47.280 --> 0:07:50.560 to interpret everything that Trump and his administration say or 0:07:50.560 --> 0:07:53.000 say they're going to do, because gosh, they said they 0:07:53.040 --> 0:07:54.400 were going to do this crazy tariffs thing and then 0:07:54.440 --> 0:07:56.080 they did it five times crazier than everybody thought they 0:07:56.120 --> 0:07:58.160 were going to do. Yeah, right, and not just crazier 0:07:58.200 --> 0:07:59.920 in terms of levels of tariffs, but in terms of 0:08:00.200 --> 0:08:03.040 like the clownishness of implementation, right that like the chat 0:08:03.120 --> 0:08:06.120 GBT night before tariff table with the Penguin Islands and 0:08:06.200 --> 0:08:08.600 like the whole thing. Right, So then when Trump is 0:08:08.640 --> 0:08:10.880 out there saying, Okay, tomorrow, you know, next week we're 0:08:10.880 --> 0:08:13.000 going to deport thirty million immigrants or like whatever crazy 0:08:13.080 --> 0:08:15.040 thing that he says, the market kind of has to 0:08:15.160 --> 0:08:17.840 take that more seriously now, right, or at least question 0:08:18.000 --> 0:08:20.560 like what are the possible implications? And so I think 0:08:20.600 --> 0:08:24.240 it's a very different environment going forward, right, It's unlikely 0:08:24.320 --> 0:08:26.520 that that's going to just change and that he's going 0:08:26.600 --> 0:08:28.960 to suddenly turn into like a really serious guy. 0:08:29.800 --> 0:08:32.000 So, speaking of things being weird, and there are any 0:08:32.080 --> 0:08:34.240 number of weird things that we could choose to talk 0:08:34.240 --> 0:08:36.360 about here, but like one of the weirdest to me 0:08:36.760 --> 0:08:39.679 has been what's been going on in equity volatility. So 0:08:39.880 --> 0:08:43.839 we've had a very big gap between the VIX, which 0:08:43.920 --> 0:08:47.800 is implied volatility versus realized volatility, which you know, like 0:08:47.960 --> 0:08:50.439 maybe explain the difference to us just to begin with, 0:08:50.600 --> 0:08:53.440 and like why we've seen that gap really developed? 0:08:53.600 --> 0:08:55.959 Sure? Absolutely, So the VIX is up is something that 0:08:56.080 --> 0:08:59.160 everybody talks about, but not everybody really thinks about exactly 0:08:59.200 --> 0:09:01.319 what it is, right, it's the fear index. But what 0:09:01.480 --> 0:09:05.199 it is is it's a level of what's called implied volatility. 0:09:05.320 --> 0:09:06.760 So in some sense you could think of it as 0:09:06.880 --> 0:09:10.679 the market's forecast for realized volatility over the next month 0:09:10.800 --> 0:09:13.600 based on option prices. It's a little bit more nuanced, though, 0:09:13.640 --> 0:09:17.760 because calculation that they chose for a VIX isn't regular volatility. 0:09:17.760 --> 0:09:20.760 It's something called variance, which is volatility squared but then 0:09:20.840 --> 0:09:23.640 normalized back into units that are volatility. And the distinction 0:09:23.760 --> 0:09:26.480 there is that it's so the level of VIX is 0:09:26.520 --> 0:09:28.120 the level of what's called the variance swap, and a 0:09:28.200 --> 0:09:30.760 variant swap pays you, as a volatility trader who buys 0:09:30.840 --> 0:09:34.640 it proportional to the square of volatility. And so what 0:09:34.760 --> 0:09:37.439 that means is if volatility doubles, you actually make a 0:09:37.520 --> 0:09:39.760 whole lot more money, or if volatility goes up by 0:09:39.840 --> 0:09:43.360 four times, you make a ridiculously amount more money. Yea's right, 0:09:43.400 --> 0:09:45.000 there's a big slope to it, and so you have 0:09:45.160 --> 0:09:47.720 to pay a big premium to buy a variant swap 0:09:47.840 --> 0:09:50.079 relative to what you would pay to just buy volatility. 0:09:50.559 --> 0:09:54.559 And so when you compare the VIX to realize volatility 0:09:54.679 --> 0:09:57.560 or how much markets are moving on average. On average, 0:09:57.559 --> 0:09:59.480 there should be an extra premium there. It's not just 0:09:59.720 --> 0:10:04.120 direct comparable. Now to Tracy's point, though, realized volatility recently 0:10:04.200 --> 0:10:07.480 has actually been generally much higher than like the average 0:10:07.559 --> 0:10:09.520 level of the VIX. Now, the VIX did spike into 0:10:09.559 --> 0:10:11.839 the fifties kind of briefly, but it's mostly come back 0:10:11.880 --> 0:10:14.680 down into like the thirties and high twenties. But yet 0:10:14.760 --> 0:10:17.199 markets are often moving you know, three percent in a 0:10:17.280 --> 0:10:19.000 day or four or five percent in a day, which 0:10:19.120 --> 0:10:21.520 implies a much higher level of implied volatility. 0:10:21.600 --> 0:10:23.440 It's a crazy chart. So you can you can chart 0:10:23.520 --> 0:10:26.400 on the Bloomberg on your handy Bloomberg terminal, like the 0:10:26.480 --> 0:10:29.400 Gamma index versus the VIX. You could see that like 0:10:29.920 --> 0:10:32.559 the jaws kind of opening over the past few weeks. 0:10:32.679 --> 0:10:36.280 Yeah, very much so. And again that's really reflects a 0:10:36.640 --> 0:10:39.160 you know, aggressive bet on the part of market participants 0:10:39.240 --> 0:10:41.719 that realized volatility has been high, but it's going to 0:10:41.760 --> 0:10:44.319 be lower over the next month than it was, and 0:10:44.440 --> 0:10:46.360 it's and actually the degree to which you see that 0:10:46.480 --> 0:10:49.320 in your chart is understated because of that variant swap effect. 0:10:49.400 --> 0:10:52.079 You're actually not really even comparing the right number with 0:10:52.200 --> 0:10:53.880 the right number to compare would be like at the 0:10:53.920 --> 0:10:55.959 money implied ball, which you can also plot in Bloomberg. 0:10:56.040 --> 0:10:57.079 Oh what's the ticker for that? 0:10:57.320 --> 0:10:59.360 So you would just do SPX index and then you 0:10:59.400 --> 0:11:01.160 would do there's going to be a field for it, 0:11:01.200 --> 0:11:05.960 which would be like one month, one mt h something 0:11:06.000 --> 0:11:07.080 something field. 0:11:07.080 --> 0:11:09.679 But yeah, oh awesome, Yes, this is very useful. 0:11:09.400 --> 0:11:11.440 Thank you. There you go, And that guy will usually 0:11:11.559 --> 0:11:15.080 be anywhere between say three and eight or ten points 0:11:15.240 --> 0:11:17.319 below vix, depending on the level of X. So with 0:11:17.440 --> 0:11:19.640 VIX at fifty, that's probably at forty or thirty eight or. 0:11:19.640 --> 0:11:20.319 Something like that. You know. 0:11:20.480 --> 0:11:23.480 Tracy and I we put on events, trivia events, et cetera. 0:11:23.720 --> 0:11:26.439 One of the dreams that we have though, is a 0:11:26.559 --> 0:11:31.839 Bloomberg terminal live company competition terminal Olympics where we get 0:11:31.880 --> 0:11:34.880 like twenty traders and they're all seated at a terminal 0:11:35.440 --> 0:11:38.760 so good calculate actually, and they always flashes on a 0:11:38.800 --> 0:11:40.920 screen who gets the answer first? 0:11:41.240 --> 0:11:42.439 Like, how well do you know? 0:11:42.720 --> 0:11:44.160 So that would be such a good tea. 0:11:44.280 --> 0:11:47.160 I think we think Ben for coming on if nothing else, 0:11:47.200 --> 0:11:50.680 to give us quotes and news about functions for when. 0:11:50.559 --> 0:11:51.880 We eventually put this on. 0:12:05.440 --> 0:12:08.080 I don't follow like you know, the Wolf of Gamma 0:12:08.240 --> 0:12:10.079 or whatever on TikTok you've seen anything good? 0:12:10.120 --> 0:12:11.280 What are they saying they got? 0:12:11.800 --> 0:12:13.040 They all got real quiet? 0:12:17.080 --> 0:12:18.640 What are you seeing out there? You got any good? 0:12:18.760 --> 0:12:21.880 Like tweets or you know sellers or whatever. 0:12:22.120 --> 0:12:24.760 Seriously, so as you know, like on a regular basis 0:12:24.800 --> 0:12:28.119 in normal environments, like everybody is tagging me in ridiculous 0:12:28.400 --> 0:12:30.920 like tweets or Instagram posts or whatever that that these 0:12:31.000 --> 0:12:34.120 kind of option selling influencers are making, you know, the 0:12:34.200 --> 0:12:36.640 coal options grind guy and like all these people. And 0:12:36.880 --> 0:12:39.040 as of you know, a couple of weeks ago, there's 0:12:39.200 --> 0:12:42.839 just absolute crickets from that community because the types of 0:12:42.960 --> 0:12:45.480 trades that you know, they they advocate, as we talked 0:12:45.480 --> 0:12:47.120 about last time, you know, they make a little bit 0:12:47.160 --> 0:12:49.360 of money on average, you know, for a while, and 0:12:49.440 --> 0:12:51.000 then they give it all back or twice as much 0:12:51.080 --> 0:12:54.199 back when something like this happens. And so there's not 0:12:54.360 --> 0:12:56.480 a whole lot of talking coming from that crowd, and 0:12:56.520 --> 0:12:59.200 you see it reflected. You know, obviously you can't see 0:12:59.280 --> 0:13:01.520 what you know is how happening to those highly over 0:13:01.600 --> 0:13:04.400 leveraged individuals that are unfortunately following that kind of advice. 0:13:04.480 --> 0:13:07.440 You know, you can look at how well like covered 0:13:07.520 --> 0:13:11.160 call ETFs are performing relative to just the underlying and 0:13:11.240 --> 0:13:12.880 things like that to get a little bit of of 0:13:13.040 --> 0:13:14.640 a little bit of a sense. You know, look at 0:13:14.679 --> 0:13:18.160 the mstr covered call ETF for example, right, And it's 0:13:18.280 --> 0:13:21.319 just bad because the worst possible environment for those kind 0:13:21.360 --> 0:13:25.599 of strategies is when you have a sharp spike in 0:13:25.720 --> 0:13:28.599 realized volatility, and especially if there's like a lot of 0:13:28.720 --> 0:13:31.120 chop and back and forth, you know, mean reversion, right, 0:13:31.200 --> 0:13:34.199 because you'll have a situation where where they're selling like 0:13:34.280 --> 0:13:36.319 these weekly options, right, and you have a really big 0:13:36.400 --> 0:13:37.880 sell off for a week, they lose a bunch of 0:13:37.920 --> 0:13:40.400 money on their puts, and then they sell some calls 0:13:40.400 --> 0:13:42.360 and you have the big rally back, and then they 0:13:42.440 --> 0:13:44.800 lose their money on their calls. And again, none of 0:13:44.840 --> 0:13:47.200 this is like something that they explain to their followers. 0:13:47.240 --> 0:13:49.720 They just sort of tell their followers that the income 0:13:50.120 --> 0:13:52.120 of the strategy is like the option premium that they sold, 0:13:52.160 --> 0:13:54.480 and they don't conceptualize the possibility that you can actually 0:13:54.520 --> 0:13:55.640 lose money when you sell the option. 0:13:56.320 --> 0:13:59.120 Tracy, every once in a while, I'm reminded that we 0:13:59.480 --> 0:14:03.760 exist in world where there's like fourteen ETFs. 0:14:03.200 --> 0:14:04.880 That are based on various doing things. 0:14:05.040 --> 0:14:08.640 Micro strategy is crazy amazing anyway, Sorry, well, also. 0:14:08.760 --> 0:14:10.840 I'm still blown away by the fact that micro Strategy 0:14:10.920 --> 0:14:14.280 also calls out the volatility and its share price in 0:14:14.400 --> 0:14:16.680 its earnings call as like a selling point. 0:14:16.720 --> 0:14:20.080 Look how volatile we were in circuits and it's beautiful, right, 0:14:20.160 --> 0:14:22.480 But I mean Sailor is very smart, right, so Sailor 0:14:22.520 --> 0:14:24.280 understands all this stuff perfectly. If you if you can 0:14:24.360 --> 0:14:26.480 run a really really high volatility company, yes you can. 0:14:26.520 --> 0:14:28.640 It means hedge funds love your convertible bonds and will 0:14:28.640 --> 0:14:30.800 pay anything to get your convertible bonds. Yeah, it makes 0:14:30.800 --> 0:14:32.920 your actually makes your credit cheaper. 0:14:33.200 --> 0:14:34.640 And I gotta say, if people want to hear more 0:14:34.640 --> 0:14:37.360 about this, we did record a lots more with Matt Leveeh. 0:14:37.400 --> 0:14:38.080 It was a great episode. 0:14:38.120 --> 0:14:39.760 God, it feels like so long. It feels like it 0:14:39.840 --> 0:14:40.240 was two years. 0:14:40.400 --> 0:14:40.720 We get the. 0:14:40.760 --> 0:14:43.920 Luxury of talking about micro strategy for a whole episode once. 0:14:44.000 --> 0:14:44.600 Pretty amazing. 0:14:44.760 --> 0:14:47.160 I feel like this is kind of the secret of 0:14:47.400 --> 0:14:50.680 volatility and options trading, which is like you think that 0:14:50.840 --> 0:14:53.240 a lot of these guys, a lot of these influencers 0:14:53.280 --> 0:14:57.040 would really enjoy this particular trading environment, but so much 0:14:57.080 --> 0:14:59.760 of it is based on that mean reversion that Joe 0:15:00.160 --> 0:15:02.320 pointing out that a lot of stuff just blows up 0:15:02.400 --> 0:15:04.880 when you finally get volatility right, it really does. 0:15:04.960 --> 0:15:06.680 Wait not to come back to this, but MSTR. But 0:15:06.800 --> 0:15:08.800 did you see that there is going to be MSTR 0:15:08.960 --> 0:15:09.680 for Solana? 0:15:10.280 --> 0:15:13.160 Yeah? Yeah, and they're yes, they're trying to I was. 0:15:13.600 --> 0:15:17.240 I actually appeered on a crypto podcast recently and I 0:15:17.400 --> 0:15:18.280 was like, I'm tapping out this. 0:15:18.400 --> 0:15:19.640 I don't understand MSDR. 0:15:19.840 --> 0:15:22.560 But now there's a bunch of like copycats, and the 0:15:22.640 --> 0:15:24.240 question is can anyone really repeat this? 0:15:24.640 --> 0:15:24.800 Yeah? 0:15:24.840 --> 0:15:27.360 Yeah, but GSR just led a big round and to upa. 0:15:27.400 --> 0:15:28.680 I just have to read these. Sorry, I have one 0:15:28.720 --> 0:15:30.040 more question, but I just before I do. 0:15:30.280 --> 0:15:33.440 Here's some of the ETFs Defiant daily target two x 0:15:33.560 --> 0:15:38.200 long MSTR ETF yield max MSTR Option income Strategy ETF 0:15:38.520 --> 0:15:42.240 t REX two two x long MSTR daily target ETF 0:15:42.560 --> 0:15:46.360 bit wise MSTR income Strategy. Oh there's another one st 0:15:46.560 --> 0:15:49.600 key day, one hundred percent MSTR and one hundred percent 0:15:49.680 --> 0:15:51.640 coin TF. So I guess it makes us some coinbase 0:15:51.680 --> 0:15:51.920 in there. 0:15:52.080 --> 0:15:53.560 There's a lot more. I just had to read those 0:15:53.600 --> 0:15:56.240 in last question for me, Like, if you're. 0:15:56.120 --> 0:16:00.400 A long only investor, just a normal whatever investors I am, 0:16:00.720 --> 0:16:03.680 you know you have two choices I think, which is 0:16:03.800 --> 0:16:06.880 one the hope and praise strategy, which I always actually 0:16:06.880 --> 0:16:08.880 think is very legitimate because that does tend to work 0:16:08.920 --> 0:16:11.400 out over a long enough timeline. Or they're like, oh, 0:16:11.480 --> 0:16:15.000 I really need to think about diversification strategy or something 0:16:15.080 --> 0:16:18.640 like that. Okay, in your world, don't you still have 0:16:18.760 --> 0:16:21.120 to have some sort of view because if the question 0:16:21.440 --> 0:16:24.640 is do some of these Greek letters snap back into 0:16:24.680 --> 0:16:26.920 place or there's a gap between where this Greek letter 0:16:27.000 --> 0:16:31.120 and this Greek letter are pricing to make money, don't 0:16:31.200 --> 0:16:31.960 you still need. 0:16:31.920 --> 0:16:32.920 To have a view like I do. 0:16:33.360 --> 0:16:35.680 That's a great question. So there's a couple of different 0:16:35.720 --> 0:16:39.240 important things here. There are different types of trades in 0:16:39.320 --> 0:16:43.040 the derivatives world that are driven by dislocations. Some of 0:16:43.160 --> 0:16:47.360 those trades make money on realized dynamics and markets and 0:16:47.520 --> 0:16:51.080 don't rely on some implied Greek coming back into Okay, right, 0:16:51.160 --> 0:16:53.520 so Tracy was talking about, you know, realized volatility and 0:16:53.520 --> 0:16:56.160 implied volatility. This is like a simple dumb example, but 0:16:56.280 --> 0:16:59.080 just suppose that implied volatility was just always way too low, 0:16:59.160 --> 0:17:01.840 and realize volatiley was way higher for short term options. 0:17:02.080 --> 0:17:03.840 You would just buy short term options and hedge them 0:17:03.840 --> 0:17:06.240 all the time, and you would just make money constantly. Yeah, 0:17:06.320 --> 0:17:08.320 and you wouldn't need that to ever change. Wouldn't ever 0:17:08.359 --> 0:17:10.320 want that to change. You wouldn't ever want that dislocation 0:17:10.440 --> 0:17:12.320 to go away. Okay. So there are some things like 0:17:12.440 --> 0:17:15.520 that that we can make money based on a dislocation 0:17:15.680 --> 0:17:18.720 but without requiring the dislocation to close. And then there 0:17:18.760 --> 0:17:20.840 are other things where exactly as you point out, you're 0:17:20.920 --> 0:17:23.520 trading an implied dislocation and you're going to only make 0:17:23.600 --> 0:17:26.119 money when it reverts. And for things like that, you know, 0:17:26.200 --> 0:17:28.000 we really have to think hard about, Okay, where is 0:17:28.040 --> 0:17:31.040 this dislocation coming from? What flows are driving it? Are 0:17:31.119 --> 0:17:34.040 those flows that are going to be persistent and not 0:17:34.200 --> 0:17:36.959 go away and it's unlikely that those dislocations close. Are 0:17:36.960 --> 0:17:40.040 there fundamentals that actually cause that dislocation to stay there 0:17:40.160 --> 0:17:42.440 even if it doesn't really make sense? Or is this 0:17:42.600 --> 0:17:45.879 something that is being driven by temporary supply and demand 0:17:45.960 --> 0:17:48.840 dynamics in the market and you understand what might push 0:17:48.880 --> 0:17:50.560 it back over what kind of time horizon? And the 0:17:50.680 --> 0:17:52.680 latter is an interesting trade. The former really isn't, And 0:17:52.720 --> 0:17:54.280 you actually have to think very hard about that. You 0:17:54.320 --> 0:17:56.639 can't just look at the level of the Wazoo parameter 0:17:56.880 --> 0:17:59.400