YouSaid · the spoken record

Kris Sidial

lines on the record: 101
first: 2023-06-25
most recent: 2023-06-25
sittings or episodes: 1
sources: podcast

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“It's just like smoke and mirrors, right? No, yeah. How much money did you give me? How much money did I return you point blank period?”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“That's why at the end of the day, you have to get alpha from somewhere, and this is the thing that we preach. If you have no alpha, right, an investor is in a negative expected value sort of thing, like tail risk hedging is negative expected value and you have no alpha, it's a double whammy, right? Now you're losing both ways because it's just going to look just like that. I think the people that do their due diligence and they kind of go through the rounds, they may see that there are better sort of options for tail risk sort of strategies than the ones that they are used to seeing. And the more the industry gravitates over towards those sort of different approaches, I think overall will be better and will move away from this sort of way of thinking about these things where it's ridiculous that tail risk managers even report that sort of thing where they say, oh no, my performance numbers is based on the overall allocation amount.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Got it. Yeah, that makes sense. And that goes back to the bank hedging thing. Like if you were a bank and you properly and you adequately hedged for a 500 basis point increase in a year, you hedge too much. You know what I mean? Like if you're always preparing for a March 2020, you're just going to be leading a ton.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“They may use marketing and things like that, and they may get headlines out, but really even the most convex of convex products will not return 4,000% in a market crash. Responsibly, I would say.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“It's exactly like UVXY, right? Where if you think about it, if somebody says, if UVXY is at $2 and it goes to $10, you're going to be like, oh my God, it's 5X. You know, you return five times the return. Well, guess what? Over the course of one year, you're still down 90-something percent, right? It's important for investors to understand that when they're thinking about a tail risk allocation with some of these type of passive products and these type of passive institutions to understand the convexity versus the carry that they're going to have. And there's a very easy way. You just look at the carry, what's the anticipated carry, and what's the anticipated payout profile if you shock the S&P down 20% and vols are up like 30, 40 vault points. So I think it's really a learning thing, but some of these type of managers will have different approaches where they”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“A buck. You're not going to say the return on that allocation was 2,000% because guess what? You've bled, blood, blood, blood, bled. And then all you did was just get back here, right? Is the return 2000% on the investment? Absolutely not, right? You did not return 2,000%. You have lost 90-something percent. You know what it's similar to like? It's like UVXY.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Pretty much what ends up happening is from the time that you have that sort of million dollars, they start bleeding money, right? They start bleeding, bleeding, bleeding, bleeding, bleeding, bleeding, blending. Now, in that sort of allocation itself, they will have options that they are carrying, right? And they may end up like, so let's say, for example, I buy a Say, I use a percentage of the allocation that you gave me and I bought a SP put for five cents. And the S&P put for five cents has now went to, let's say,”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“So, a good friend of mine who's another terrorist manager is Boaz Meinstein. Shout out to Boaz and Weitzen at the guys over at Saba. Those guys are really good guys. I think they do a fantastic job too. We had dinner and we spoke about this directly, right? And I want to give the listeners an understanding when they see things like, oh, this hedge fund made 4,000% or 5,000%. That's not the case, right? The most convex of convex products will not return that. Right. And here's how this effectively works. Let's say you give a tail risk manager a million dollars. You give a tail risk manager a million dollars and”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“So that's a methodology when a tail risk fund that has a lot of bleed, they may report it in a way that underreports their true losses, as you see it. But what about over reporting the true gains? I mean, to the extent that there are tail risk funds that say, oh, we were up 1,000% or 2,000% or 3,000%. And a few come to mind, perhaps one in particular. I mean, what methodology are they using? Are they saying, oh, during March 2020, we made so much money that if you had invested it back in the S&P 500, you would have been up 3,000%. I mean, I literally don't even understand it.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Have to make sure you head that directly. But on the other side, we have the hedge fund arm, which I can't really speak to the hedge fund because it's all compliance and stuff like that. But if you guys want to see the performance numbers, you could go on websites like HFM. You can see our performance numbers on there. And we think the numbers will play in line exactly what we're saying on this thing where we don't really believe in that sort of continued bleed, continued bleed approach or reporting it in that sort of manner where you say, hey, you've given me one million dollars, but that's 1% of your overall portfolio and you've, you know, you've lost all of it, but I'm only going to say you lost 1%. That's just a very poor way of doing it, in my opinion.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, those could be sort of overlays, right? But generally, nine times out of ten, we'll tell them unless it's something that's very exclusive, you may have somebody that may say, hey, I'm trying to hedge off my Tesla stock risk, right?”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Yes, right. You may have times where investors come to us and they say, hey, can you customize some sort of hedging solution for us? We'll present some sort of custom hedging solution for them.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Because it's like, I just don't, we don't believe in it. We don't believe in that sort of approach. We believe in, okay, if you give us a dollar, our job is to try to trade during markets going up or markets being flat to make sure that your return is at the end of the day, at the end of two years, three years, one dollar. If a crash happens, hopefully that dollar turns to $3, $4, $5. That's really the goal. It's not sort of bleed, blee, bleed, bleed, bleed, and then we make the reporting off of what the expected performance, or sorry, what the portfolio holding was, I think that that's just not really a good way or an honest way to present. Performance numbers. The other thing I would say is we have An SMA, an RIA business, which handles SMA. So you may have”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I think that's all smoke and mirrors. I think that's a terrible way because it's misleading to investors. We look at it in terms of if you give us a dollar, how much did you make or lose on that dollar? Not that dollar is based on an overall part of your portfolio or something like that. I think that could be very misleading and a lot of people that are in the tail risk space, they tend to try to do that, right? you know, a couple of the larger managers say like, hey, you know, let's say you allocate a million dollars to them and after three years they've lost it all, right? And they'll say, well, no, that million dollars was only one piece of your portfolio, right? 1% of your portfolio. So you only lost 1%. And the industry has kind of gravitated over towards that, but that's why we don't really bucket ourselves with that sort of way of tail risk.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Presents your returns to potential new clients because if I am trying to beat the S&P 500, S&P is up 9%. I'm up 11% with a certain sharp ratio. Oh, wow, I beat the market. But as a tail risk manager, you're really trying to get those positive returns when everything else is crashing, that negative correlation, so that even if your fund during 2020, even if a table's fund was, quote, down 10% in aggregate in 2020, if it was up a tremendous amount during March of 2020, that provided a value. So, I mean, do you report, do you do what a regular manager says and says, oh, oh, we're down 10%? Or is there a different reporting mechanism? Could you tell us a little bit about that? And then maybe you could also share your thoughts on the alternative reporting mechanisms that other tail risk funds use.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, for guidance. There we go. I think what's really tough with the banks, particularly the regional banks, is that so much of. Hedging and whether they think they're long rates or short rates, if they make money, if interest rates go up or down, is based on how many loans they can make at higher yields and how much their deposit costs go up and how fast deposits leave banks based on that spread. And all these are assumptions. So with a few pen strokes, you could say, oh, actually, we're hedged, or actually we're not hedged. A final question for you, Chris, is how do you think about tail risk managers such as yourself? How do you report your results to current?”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“That's what causes those type of events when the banks are not in line with what the Fed is going to do, that could create that type of thing. But when the Fed's give you a dot plot and they... Relatively stick to the dot plot. It gives a bank's guidance and times to hedge out these positions and ease through it.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Implications that can come from the interest rate hikes that can lead to some sort of systemic risk, which is an example maybe like the SVB thing or whatever it is to kind of come down the line. But I would say that that continues to be a situation that Would say banks are slowly evolving into or slowly getting that risk off the good thing is that I think the Fed and some people may chastise me for this, but I think the Fed has done a good job in tailoring expectations to the market. So it hasn't been a situation where you just wake up and it's a 50 basis point hike out of nowhere. That's dangerous in my opinion.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“It would be foolish to think that there isn't more of that, right? The majority of the industry is set up that way. I know banks have XVA desks, right? And XVA desks are similar to like a tail risk desk, right? XVA desk is pretty much designed to hedge on off the sort of bank explosion sort of thing. And I would say in this type of environment, that's one of the factors that they continue to look at and try to hedge off as well, right? Because banks are so interest rate sensitive. And when you've had years and years and years of this sort of policy where volatility has been pinned, when you start getting the unpinning, right, when you start getting the unpinning, you're bound to have things that are breaking. And this was something that we were talking about last year was that we don't think that the Fed raising interest rates are going to necessarily crash the market, but it's the”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Look, there were a couple things that were really interesting that happened throughout the last year and a half, right? The first thing was the impact that the guilt market had across the pond, right? With some of the larger pension plans over there in Britain. That's a real thing, right? That's a real thing where you saw the ramifications as to what it could be. Thankfully, that was contained. But then you saw another form of that during the whole SVB thing, right? Where the interest rate exposure that these domestic banks had were, you know, just wasn't able to handle that type of volatility. I personally think, and this isn't my space, we trade equity vault, but I personally think there's more of that that's kind of under the cover.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“But I do know that there are definitely very large institutions that are aggressively selling these sort of things. I think Jason Buck and the team over there went to the Global He could conference and they may have had some sort of commentary as well. But we have a couple of friends that are in the business. You know, you talk to people, you get to know people, you go to conferences and panels and things like that. Some of these larger participants are open that this is what they're doing and they see it as a form of yield. And I think there's a lot more of that and people are more tight to the chest, don't want to say that, but the data affirms that people are trading these in large size and they are selling them.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, I would say for right now, just of the sheer nature of the infancy of it and the timing of it, there are no policies around it, right? And again, you're still trying to get banks that are factoring in the margin requirements and things like that. So there are no real regulations around this. Maybe there won't be, right, until after a crash, or maybe there will be in four months or something like that. But right now, it's just a, it's a new space in the market that is garnering a lot of attention, but there has been no action to move on it as of yet.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Right, but regulars inquiring about it and being aware of it is different from them doing something about it and having a policy, right? So is it fair to say that there are many aspects of finance and financial trading that are well regulated, rigorously regulated, but zero data expiry options is not one of them. Is that fair to say?”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Do I know that these sort of ETPs will not cause a systemic risk? Because it almost did during Vulmagedan, right? Vulmageddon was very well contained to an extent because volatility went up, the S&P went down about like 4%. And then within a week, everything was kind of cleared out. But think about the amount of notional or the amount of exposure that's traded then compared to the zero DT now. significantly different. I don't know if something, you know, you have a crash event that occurs and then regulators look to be more stringent on these sort of policies. Regulators are asking about these sort of things though, right? They're not definitely not asleep at the wheel. You know, I think people think that, oh, you know, they don't even know that your DT is doing this. They've definitely been inquiring. And I think that they're just trying to lay out a policy that will be”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“The regulators were very hesitant to list more volatility ETPs after the XIV thing, right? So there were a couple of more of the ETPs that you had firms that were trying to bring to market like XIV, VIX. And it took a long time period, right? And the reason why is because regulators were saying,”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“I don't know. Yeah, I'm not too sure, right? I don't want to give any sort of answer with conviction because I think it's a very great area. And I think that the only thing that we feel strong conviction on is that you now have this. This huge elephant that's in the room, and people are saying that the elephant won't break through the door. After a certain amount of time, the elephant's going to break through the door, right? Because it physically can break through the door. The ramifications that occur after that, I'm not too sure. I'm not too sure if regulators will step in. I mean, you saw with the VICTPs, right?”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“If there's no listed price, it's only down 5%. The sort of The counter trading could imply there will be a And the options will price it in a forward market even if the market isn't listed in a kind of a shadow bid. So do you expect this to be a one-day, two-day, three-day event? And then it will calm, will resume to the market, in which case it would be good to short volatility on like the second or third day. Or do you think this actually could cause something systemic that, oh, it's not just a flash in the pan. This is something serious.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so there's a couple of circuit breakers down, I believe the final circuit breaker is down 15% where they halt trading. A lot of people talk about halts are good. They minimize volatility. Like, I don't believe that. I think halts escalate volatility. If you're a fund manager and I tell you that the entire broad market is halted, what's the first thing you're going to think about doing? You're not going to sit there and say, oh yeah, I'm going to hold these now because it's going to turn around. You're going to say, oh my God, like our positions are down. Like we probably need liquidity because if this thing continues to halt, like we're not going to be able to get out. So that's just my view is that I don't think halts. And you see this in small cap stocks as well. If you look at some of the price action and small cap stocks, halts go on every day. The NASDAQ puts this stuff out every single day. You have like a halt list, right? There's different types of halts, volatility halts and things like that. But behaviorally, I'm not a subscriber that”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“It's about 20%. Wow. A little more. I think like 22 or something like that, probably more than that. But yeah, I think Kalenovich came out and said that it would be down 20% day. I mean, maybe, you know, the models that we run when we kind of model this out, we saw more like a seven and a half percent impact, but the models, you know, who knows when that moment happens, right? Maybe it's down 30% or something like that. I don't know. I'm not, I have no clue, but I just know that it can certainly escalate the price action of the S&P.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Something to come from those type of dynamics when they're bucketed together. So that's really our view is that we have no crystal ball to say that, all right, is this going to happen tomorrow or the next day? But like if volatility starts to pick up, these products definitely have the strength to move the market around on a regular day. So it would be in our opinion quite foolish to believe that it would have no effect on the market on a day where there is a true catalyst and volatility is moving.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“People in the Vall Space knew there were people, I mean, Tracy Alloway, right, was one of the people that put out that tweet saying, hey, this is probably going to be bad for the VICTPs if volatility were to spike. Everybody knew that this was an inevitable thing. But people kind of just took it and was like, yeah, whatever, right? Yeah, yeah, whatever. There is no genius sort of take here to say that zero DT is definitely going to impact the market. Everybody has this sort of view that says like, oh, no, you know, all these people are perma bears or they're just trying to get, you know, engagement around zero DT. The reality is that you have this brand new product where regulators don't know how to regulate it. You have the brokerages that don't know how to provide some sort of margin requirement around it. People are very engaged around it. They're trading it, trading an environment with volatility is very low. How can you not?”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“All right, February 2018. How many people in the volatility space knew that was occurring at a conference, you had Chris Cole and Michael Green both stand up and went toe to toe, right, and got an arguing sort of match with one of the creators of the product itself saying, look, this product is hazardous. It's going to go to zero.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“You look at some sort of a Monte Carlo sim where you just think forward forecasting in the next 20 years, you mean to say that no event will occur on that time frame with that amount of notional being traded that can drop the market, like out of all the different paths that could take place, no event. I mean, obviously, we're bound to run into it. And I hate to sound like this, but it's one of those things that it's inevitable. You will, we will eventually see a day where that sort of thing comes up on the roulette wheel. It's bound to happen when you have that type of sheer amount of notional exposure that's being traded. And look, it's one of those things too where I think back at, I think back, you know, the XIV thing, right? The volume thing. I think back.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“No, totally on the broad market, right? And I think that this could lead to a more reflexive one day move on the S&P or it could cycle into a two-day move in the S&P. When you talk about, okay, can the market go down 7% in one day on no dose? A lot of people do not believe that. A lot of people will not subscribe to that. They'll say, oh, the market makers are super liquid. They'll be able to price that back in. When you look at the sheer notional that's traded and when you run some sort of a shocks and slide scenario on these sort of things.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Vice versa. The market was up a percent and a half and just ended up closing down a percent or something like that. No news, no catalyst Nothing at all. The price action itself in the broad market is showing you that on a smaller time frame, this type of volatility is being enhanced, and we believe that it's being enhanced because of the zero DT stuff and the hedging that comes from there.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, totally. So we write about a couple of things in terms of like how the gamma profile has changed, how the Vega profile has slightly changed. We write about how the volume transition has changed. Think the most important, or I would say the most qualitative thing that may be just most relevant for just a regular investor is if you just take some time and you just sit down and you know, maybe some people don't have all day to look at the S&P, right? Because it could be very boring. But if you look at the price action in the S&P, you'll see intraday, especially on OPEC's weeks, there are things that start to move in a very abnormal manner, right? So on no news, you may just see the market just do this, right? Looking like it's going to tank. And then out of nowhere on no news, it just turns around and goes right back up. And people are like, how did the market was down 1%? How in the last 15 minutes it turned to be flat? And in the last 30 minutes, it closed up 1%.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Sometimes you may have another one, so Monday, Fridays, whereas maybe some smaller cap, illiquid name, you know, you may only have a monthly or something like that. So the exchanges are definitely trying to feed into the appetite for these sort of things.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, pretty much, you know, that's, I mean, you've had zero DT options for, I guess, technically since forever, right? Because at some point, there will be an option that expires on that day. But really, what ended up happening was some of the exchanges started seeing the appetite for these sort of products. And then I may be getting this wrong, but they started listing the Monday expirations and said you had Fridays. And then I think they went to Wednesdays and then they started doing Tuesday, Thursdays. And then once the Tuesday, Thursdays, you realize, well, okay, so there's options literally every single day of the week now. And I think you're going to start seeing that with single stocks as well. I think that's the next step up is some of the exchanges we'll try to push some of the single stocks. And the tech names and the names that are high flyers, you see a more active option chain, right? Like I think Tesla, you have Monday.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Think the SP would not react, or some of these high frequency traders or market makers would not jump over the price you think they're going to say, oh, the S&P is going to go from 4,400 to then 44390 or whatever, right? Or then to 4100. It doesn't work that way, right? It will skip on you absolutely intraday and definitely overnight. I think those are the hazards that kind of presents itself with these sort of zero DT stuff because you have to think about the sheer amount of exposure that's being inventoried with some of these firms that have actually been able to get away with it over the last year and some change because we were talking about which trades have been making money. Short ball short dated stuff has totally been making money.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Exactly, exactly, totally. And real markets don't work that way. In favor of the people who do believe that, though, what I would say is that if there's one product in the whole world that's the most liquid, it would be the S&P 500, right? So like you can argue that the S&P 500 would be mega liquid, especially with all the market makers and stuff like that, but that still doesn't take off the... Situation that lays on the platter where you can still have the market skipping through certain strikes and getting to certain prices based on some sort of news. I mean, imagine if today, I mean, God forbid, right? God forbid there is some sort of geopolitical tension and there's some sort of nuclear bomb that gets set off.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Time's 100, right? If it gets that. And some people would say, well, the firms will hedge that. They'll cover off the exposure. But this brings in the whole point of jump risk, right? It's like, okay, what about if you have the market just out of nowhere, you know, slides down?”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“That's significantly large, right? Collecting that type of premium because when you think of the way how an option moves, I mean options could go 20x, zero DT stuff can go 100 times. They could go three, four hundred times.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Stuff. I mean, think about it, right? If you put up you wanted to go through some numbers, right? Let's say you say, okay, I want to sell these 10 Delta SP puts. And we do see that, right? You see those sort of 10 Delta S&P puts being sold intraday, right? So 10 Delta, zero DT, S&P puts. Let's say you put Let's say you put Of your portfolio to collect premium, which is an insane amount of number. Actually, maybe let's go two and a half.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, totally, so that's the thing, right? It's that some of these banks and their banks. I would say that procedures are still adapting to this because this is a new sort of thing that's been implemented. And I don't think that even like SIBO or the exchanges or even the OCC, or nobody thought that it would become this popular, right? Like it has well exceeded expectations. So the banks are still starting to deal with, okay, how much margin requirement do we need? Does this even need margin requirement? Are we going to lose clients because maybe some other sort of bank is going to say, hey, you don't need to put up that much margin to trade these sort of things, right? And right now, it's sort of this very gray area across the board. But you're right. It's super low, right? And that's the problem to start with is that you do not have a hard barometer to stop a sort of cascading effect from occurring if a couple of hedge funds are massively short, these sort of zero D.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Our firm, we're more trading focused as opposed to perma beer, betting, and hoping the market is going to crash. But really, when you think of this from a systemic standpoint, you can't help but look at the sheer amount of notional risk and the gamma risk that's being taken across the board from just this implementation of it and think that, all right, there's never going to be a scenario that's going to present itself that can lead to a crash because systemically it has the power to do that. I mean, you know, we talk about the whole JP Morgan, you know, collar roll and how that impacts the market and all these sorts of things. Zero GT is significantly more than that now. You know, it's significantly more than that.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so it's exactly defers per bank, right? And it defers per client, right? So if you're some small shop with just a couple of people, the margin that you'll be able to get is significantly different than $5 billion hedge fund or something like that. And that could be problematic as well, right? Because maybe the $5 billion hedge funds is the one that are taking that sort of implied leverage if they're selling these sort of out the money puts or out-the-money S&P calls. And you could see how this opens up this scenario to slide risk, right? What happens if the mark ate? What happens if you say the market's going to go down 10% in one day? How does this wipe out other people and cause this sort of reflexive intraday sort of hedging that could cause a crash? And I hate to be like the whole perma beer sort of thing because we're really not, you know.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“There is something else that's really interesting that's going on about this sort of thing. It's the large brokers and their ability to assess intraday margin is really, really important, right? And what I mean by this is you can effectively come out and sell Tons of zero DT options, right? And the Wei Hao intraday margining works with some of the larger primes and it's almost insane that it's so primitive, they don't have necessarily good risk systems in play to identify, hey, by the way, you could blow up doing this, right? And this, this, I'm not talking about just retail, I'm talking about larger hedge funds that are doing this, like the Bill Wangs of the World. There are people that are doing this and some of the larger primes still don't have systems that are in play to monitor some of the intraday stuff as good as they would like.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, totally. So we show what the back test results look like if you were to just follow these sort of dogmatic approaches and it's worked, right? If you just close your eyes and just sold these sort of out the money zero DT options, you've ended up making money. I would say that that doesn't necessarily mean the market makers are losing money, right? the two don't go hand in hand because as i was saying you know market makers are using this as a cleaner way and fall shops as well are using this as a cleaner way to hedge their sort of intraday gamma risk whereas you may need you know previously maybe you needed to rely on a seven day option or something like that now you're saying well i don't need to pay that price i could pay you know one eighth of the price that i would generally pay and i'd be able to hedge that sort of intraday exposure significantly better um so hand in hand is definitely the people that are selling options in this environment are they're definitely winning um i would say that”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Well, in this environment, selling the options have definitely proved well, right? And in the paper, you guys could go on amberscrobe.com and click on the research side and you'll see the paper because we show it back.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT
“Got it. So, you know, the large market maker is the biggest one. I think it's Citadel. So I'll just name that. For example, they would on the other side of so many different options flows and they have all sorts of Greek risk, Delta Gamma Vega and many, many others that I have no idea what they actually are. So you could have Delta pretty easily just by buying or selling the underlying stock. But to hedge gamma, you can only hedge like gamma with a convex instrument. You can't really hedge it with a stock. So you have to be longer, shorted option against that. And you have an explosion in these zero data expiration options. It's become much more easy, much more liquid for market makers to do that, as you said, to hedge their gamma. On the other side, you have the RAAs who are trying to get their clients and get some yield. Who's winning? I know one trade, Citadel wins, one trade, the Midwest RA wins, but in aggregate.”
2023-06-25 · Forward Guidance · The Shiny New Derivative That’s Taken Over Wall Street | Kris Sidial on Zero Day To Expiration (0DTE) Options & Tail Risk During A Volatility Bear Market · IDENTIFIED FROM THE TRANSCRIPT