After Volatility Crash, Half-Man, Half-God Says Sell Vol

Buy the dip, Marko Kolanovic (AKA “Gandalf” and/or “Half-Man, Half-God”) , Bram Kaplan and the Equity Derivatives Strategy team at JPMorgan recommended on February 5. When the market crashed there were numerous technical oddities that didn’t add up. The great “volatility crash or 2018” had correlated spreads skewing in economically illogical directions. These are some of the signs that a derivatives thinker looks for – price relationships, core performance drivers behind force of market trend, volatility elasticity.

They all sent signals to various analysts. Kolanovic and Kaplan, the team that successfully called the August 2015 flash crash and recognized the true performance drivers behind the “Brexit bounce,” there volatility crash call used the same analysis template to a certain degree. But how to play the bounce is, like much of their work, is yet another example of thinking that goes beyond the Wall Street consensus.

[munger]