In A Short Volatility World The Emperor Has No Clothes When Un-Hedged

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Mark Melin
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Chris Cole has that odd, angular perspective on the world that is often correlated with derivatives traders. Such a perspective tends to look beyond the obvious direction of the underlying asset but rather considers how quickly and expansively that price movement occurs. They look for contract structure mismatches and points when time decay premium is either under or overpriced. Cole, for his part, looks at the short volatility phenomena as the height of financial engineering and has resulted in “the Ouroboros,” a form of alchemy that creates something from nothing and fills believers with delusion, Cole believes. This “dangerous feedback loop”…

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Mark Melin is an alternative investment practitioner whose specialty is recognizing the impact of beta market environment on a technical trading strategy. A portfolio and industry consultant, wrote or edited three books including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008) and taught a course at Northwestern University's executive education program.