Blog Posts

After over 60,000 hours in the markets, this is what I’ve learned. These reflections are just my own perspective. There are many viable ways of doing things. They’re not definitive answers, but observations you may find useful as you develop/refine your own approach. Take what resonates, question what doesn’t, and remember that the ultimate test […]

Valuation is one of the most popular lenses through which to view the stock market. Whenever it becomes expensive you see headlines like this: Valuation metrics like the price-to-earnings (P/E) ratio are nonetheless limited when it comes to market timing.  Valuations demonstrate strong correlations with long-term returns, but they offer virtually no insight into short-term […]

Global macro trading and investing has traditionally been the domain of hedge funds, where managers trade broad economic and policy trends by shifting exposure across assets, asset classes, countries/regions, and currencies.  These strategies often include both long and short positions, derivatives (e.g., options, futures, swaps), and fast repositioning to take advantage of opportunities as they […]

Rising real yields (nominal yields minus inflation expectations) are often the market’s biggest wrecking ball because they represent a higher risk-free rate in “real” (inflation-adjusted) terms.  That reprices everything at once: Stocks – Future cash flows are discounted more heavily, hurting valuations (especially long-duration growth stocks). Bonds – Prices fall as yields rise. The longer […]

For traders and investors looking for returns and improved capital efficiency beyond traditional stock-only portfolios, a growing number of exchange-traded funds (ETFs) offer strategies that blend core equity exposure with futures-based or options-based overlays.  Traditionally, futures and options overlays are more active strategies pursued by both individual and institutional traders. These funds use derivatives to […]

This article is based on AQR’s paper A Half Century of Macro Momentum (PDF download), which tests a systematic global macro strategy running from 1970 to 2016, using backtested data. Instead of momentum based on price trends of the assets themselves, it applies momentum concepts to macroeconomic indicators (business cycles, monetary policy, trade, and risk […]

All traders know the feeling of being right but still losing money.  It’s one of the most frustrating experiences in the markets – your analysis is solid, your direction is correct, yet somehow your account balance shrinks instead of grows. What’s the basis behind being right and still not making money? And how do we […]

It’s no secret that financial institutions tend to be pretty private. Markets are competitive and alpha generation is a zero-sum game, so they have to be. Every order placed leaves a trace that competitors or opportunistic traders can exploit. A lack of privacy can expose positions to front-running, disclosure of sensitive positions, or invite imitators […]

Agency mortgage-backed securities (MBS), issued by Fannie Mae, Freddie Mac, and Ginnie Mae, are a multi-trillion-dollar market backed by pools of residential loans with implicit or explicit government guarantees.  Options on these securities allow traders to express views on interest rate volatility and prepayment behavior (i.e., two critical variables that drive mortgage pricing and convexity […]

Covered calls are a popular basic options strategy in practically all markets. Are they better than simply trading or investing securities per their basic linear exposure? We take a look through the lens of risk-adjusted returns (i.e., Sharpe ratios).   Key Takeaways – Do Covered Calls Improve Sharpe Ratios? Covered call strategies tend to boost […]