Blog Posts

A Corridor Variance Swap is a derivative contract that pays out based on the realized variance of an underlying asset, but only when the asset price falls within a specified corridor (price range).  Unlike a standard variance swap that captures all price movements, this instrument only accumulates variance when the underlying asset trades between predetermined […]

Portable alpha is an investment strategy that involves separating the alpha and beta components of an investment portfolio. The alpha component is the portion of the portfolio that seeks to generate returns through active management, while the beta component is the portion that tracks a benchmark index.   Key Takeaways – Portable Alpha Portable alpha […]

Forward-looking real return expectations for US, global developed, and emerging market equities have declined meaningfully compared to historical averages. We look at the projected ranges and drivers of return across these regions for the next 10 years and beyond, based on valuation, macroeconomic, and earnings growth inputs.   Key Takeaways – Expected Real Returns of […]

A covered call strategy is a type of implementation where a trader will sell a call option while at the same time owning the corresponding amount of the underlying security or instrument. Fundamentally, options are a form of financial insurance. The volatility risk premium associated with options is compensation paid by option buyers to the option […]

Jeff Talpins is one of the most successful yet least publicized hedge fund managers, quietly delivering world-class returns through a philosophy known as Modern Macro. Unlike traditional global macro investors, Talpins blends economic insight with systematic analysis and options-based risk management to create asymmetric payoff profiles in complex markets. His firm, Element Capital, has produced […]

Is success in day trading primarily a result of skill, or is it predominantly determined by luck or variance?  This article looks into the various aspects of this question, looking at the roles that both skill and luck play in day trading and trading more generally.   Key Takeaways – Skill vs. Luck in Day […]

US-China relations is one of the big themes that will drive geopolitics, economies, and markets over the ensuing decades. Accordingly, it can be highly useful to look at the current dynamics even among traders who look out over shorter-term and medium-term time horizons. What the positions the US and China find themselves in currently and […]

Most traders and investors chase returns through price appreciation, but one of the most persistent and overlooked sources of profit lies in the “carry” earned simply by holding certain exposures, especially in when it comes to volatility (often considered its own asset class).  The volatility carry strategy works to systematically harvest the premium embedded in […]

How long does it take to prove that a statistical edge in markets is real (i.e., that a trader or fund manager can produce alpha)? Here we’ll be doing a one-tailed hypothesis test where we want to prove that someone’s win rate is significantly greater than 50%. The formula derived is: n >= (Z_alpha / […]

Beating the market is a goal that draws in everyone from hedge fund pros to casual Reddit traders.  Despite overwhelming odds and evidence, many believe they can outsmart a very complex system rife with skilled professionals with massive research budgets who have more information, better analysis, and better technology than a retail trader has.  Can […]