Global EQD '23 Breakdown with Jeff Malec (part 2)

·59 min·1 clip

If the OCC changes intraday margin rules, zero DTE options could blow up—both experts agree.

This episode continues the breakdown of the 2023 Global EQD conference, hosted by Jeff Malec and his co-host. They analyze a panel featuring top volatility traders from firms like CBOE, Parallax, Optiver, Volar Capital, and OneRiver Asset Management. The hosts focus on the panelists' insights into current market risks and volatility trading strategies. The panel began with a poll identifying Fed policy as the biggest perceived risk to volatility markets. Vishnu of Volar Capital immediately noted he would stop hedging that risk, citing the typical inaccuracy of such polls. Chase Mueller from OneRiver pointed out that markets seemed unconcerned about the debt ceiling, looking through the default risk. Will Bartlett, CEO of Parallax, argued that 2022's low equity volatility was an aberration and suggested it might be "equity vol's turn" in the latter half of 2023. Robbie Knopp of Optiver discussed how structured product flow reduced skew in 2022, a trend that has started to reverse in 2023. Robbie explained that while skew got crushed in 2022, selling skew has been profitable this year, which he equated to selling out-of-the-money puts. Vishnu highlighted the paradox where skew is often higher in bull markets as investors buy protection. Chase Mueller observed that the VIX index looks relatively cheap compared to rates volatility, making it a potential basis trade. Will Bartlett noted that commodity volatility looks attractive because "the Fed can't suppress it," though this involves significant basis risk. The conversation shifted to zero-days-to-expiration (0DTE) options, with Robbie Knopp stating that high-frequency trading firms are entering this space and selling spreads based on backtests. He emphasized that market makers see balanced risk and haven't had to adjust their risk limits due to 0DTE activity. Will Bartlett offered a contrasting buy-side perspective, feeling transaction costs for 0DTE options were high relative to the volatility exposure gained. A key regulatory risk discussed was that proposed intraday margin requirements could exacerbate volatility by triggering rolling margin calls. The panelists debated whether 0DTE volume is cannibalizing longer-dated options, with Chase Mueller arguing the two are unrelated. Robbie Knopp noted the difficulty in distinguishing retail from institutional flow in electronic trading, as both can appear similar. Vishnu suggested a true systemic "black swan" event would likely require a spike in cross-asset correlations, not an isolated volatility event. During Q&A, the hosts clarified a question about why dispersion trades were praised last year but not this year, with Will Bartlett doubling down on his view that the crowded dispersion trade still poses a significant risk. The tone is analytical and conversational, dissecting professional insights for a sophisticated audience. The style is educational, translating complex trading concepts into more accessible takeaways. This episode is ideal for active traders, volatility enthusiasts, and anyone interested in the mechanics of options and cross-asset strategies. Listeners seeking introductory market commentary or non-financial topics should skip it.

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A sharp volatility conversation that turns market jargon into practical context.

This episode stays on investing, markets, risk, volatility, and complex systems, with a clear eye on how dislocations can be monetized across markets.

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You want the cleanest read on what volatility traders are actually arguing about right now.

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