Navigating Volatility with Jim Carroll

[00:00:00.07] - Speaker 1
Sa.

[00:00:41.28] - Speaker 2
Happy Monday, everyone. Welcome to this new live session. Very excited for today. Together with us we have Jim Carroll and for those who follow him on Twitter, it's Vixologist. And I'm gonna share your, your X account as well. And yeah. So Jim, glad to have you here. Sorry guys for the delay, but we're now back and ready to start. How are you today?

[00:01:09.22] - Speaker 1
Great to be here. Thanks. It's, it's, it's been raining the last several days, so being inside and on camera is fine. I'm not, I'm not missing anything.

[00:01:20.17] - Speaker 2
That's awesome. And Jim, if you want to, for those who don't know, you have not come across. Sure. If you want to give like a brief description of your experience and what you do, that would be awesome. And then we can maybe get started.

[00:01:35.25] - Speaker 1
Sure. So professionally, I am an investment advisor with a firm called Ballast Rock Private Wealth. I'm based in Charleston, South Carolina. So I'm, I'm an ex New Yorker. Spent a lot of time up there and really got involved in this volatility thing back in about 2015, looking around for things that I might include in client portfolios that were not the conventional stocks and bonds. And I came across a body of research around this vix thing and volatility. And coming out of the global financial crisis, Wall street had invented some products that could actually be traded to take a shorter, long position in volatility. So I got involved in trying to come up with ways to use those and, and that led me down this rabbit hole that ended up with me jumping on Twitter X, as it's now referred to, grabbing the handle vixologist, which I thought was a good play on somebody who makes, makes cocktails for a living. I do vix ology instead of mixology. And you know, so it's, it's been a fascinating journey. I'm not, you know, a lot of the people that I mix it up with have arguably better credentials than I do.

[00:03:20.16] - Speaker 1
I'm not a math PhD. I'm not an ex derivatives trader. I, I use the volatility exchange traded products to do this and a lot of people look at those and say, well, gee, you know, that's, that's, I, I would do that with options or I would do that with futures. And you know, my response typically is then you go do it with options or futures. That's great for you. This is great for me and for my clients. So, you know, it's really, it's been literally a 10 year journey following the ups and downs and, and continuing to try to figure out better ways to do what I do. Obviously, the products have changed. Volmageddon was a major disruption for those who were around in 2018. Got rid of a couple of, well, got rid of XIV and shook up UVXI and svcse. And then some friends of mine decided to recreate some of the products and came up with SVIX and uvix. So those are the primary weapons I use these days. So, you know, it's, it's, it's been a great journey. It's not, again, it's not the only thing I do for clients. You know, balustrade private wealth is, you know, we're a, I can't say a traditional investment advisor because we don't think traditional investment advising is the way to go in in this world that we're in.

[00:04:58.21] - Speaker 1
So we use a lot of private market strategies in addition to, you know, traditional stocks and bonds where we think they fit. And then, you know, just a, just a little taste of volatility.

[00:05:15.14] - Speaker 2
And Jim 1 so the last couple of months has been, of course, quite crazy in the market with volatility. And of course, today the market is almost also very volatile to the, to the upside. And of course, a lot of our customers and our users that have not experienced those level of volatility because, of course, some of them are maybe new to the market. They haven't really been around in 2007, 2008. So what we've seen in the last two, three months is something that will make history, I think. But could you explain basically how you look at volatility and what a volatility strategy will entail and how can people benefit from those type of strategies?

[00:05:59.01] - Speaker 1
Sure. And I think, you know, one of the side benefits of what I do and how it affects the conversations with clients is really just to recognize that, you know, markets will experience episodes of volatility. And I would divide that into two categories. You know, one is sort of isolated volatility events, and then the other is what I would refer to, you know, as a change of volatility regime. And I actually do have a chart that we could maybe pull up. But, you know, we're. We. Trump 1.0 was, you know, an experience of intermittent volatility. And so, you know, having him back in the White House, it shouldn't be a surprise to people that we're going to experience some volatility, particularly because he's got a very aggressive agenda. And the real question is, will this volatility be episodic? You know, if we go back to August of last year, we had a little volatility episode. It didn't last very long. In December, people have already forgotten that in December, around the Fed meeting, we had a significant spike in volatility that, you know, was gone in no time. And, you know, then we come to, you know, the post inauguration period.

[00:07:53.26] - Speaker 1
Yeah, there we go. There's August. You can see the spike that happened in August, you can see the spike that happened in December, you know, and then we've had this, you know, initial episode that began in late February. We retraced most of that quickly. We've now retraced virtually all of this tariff tantrum spike. You know, this can be very difficult for people to, to cope with. You know, if you're a buy and hold investor and, you know, you wake up and suddenly the market is selling off dramatically and nobody knows where the bottom is going to be, nobody knows if it's going to rebound back to levels that, you know, we saw before the spike. You know, there are two pieces to this from my perspective. One piece is do you think or do you want to try to actively participate in these moves in volatility? Because that requires a very different mindset than, you know, a strategic asset allocation buy and hold investor. But let's say you're a strategic asset allocation buy and hold investor. You're still relatively young, you got a good job, you're putting money away. Should you even pay attention to these things?

[00:09:21.28] - Speaker 1
And it depends on your risk tolerance, frankly, because what happens is sometimes people will, you know, panic when they see a sell off, the way we saw it in April, and they'll make decisions that are very short term. They may, you know, sell a bunch of stuff that they own. And, and the trick with that is, okay, well, when do you go back in? So, you know, in one perspective, for people who are trying to implement a very long term investment strategy, recognizing that these things will happen so that at least you're prepared for it mentally, you don't overreact to episodes like this can be a benefit. And that's one of the purposes that my research serves for some of our clients, is just to say these things do happen, don't overreact. On the flip side, you know, it is possible to take advantage of these moves. It's not easy. If it was easy, everybody do it, we'd all have yachts. But, you know, and, and I think your listeners will appreciate my perspective on this. I view trading volatility as an exercise in swing trading. It's Short term, it needs to be disciplined and systematic.

[00:10:55.15] - Speaker 1
You need to be able to identify swing trade entries. And then the hardest part with, you know, all you have to do is look at this, this chart to say, where do I get out? Let's say I made, you know, the right, I made a good entry. Where the heck do I get out of this trade? You know, I'm making money. If I get out, quote unquote, too early, then I leave money on the table. If I wait too long to get out, I give back profits. And so in my experience from interacting with a lot of different volatility traders, getting monetization is the hardest part. And, and figuring out, because, you know, you can look at that spike that you've highlighted, you know, where would you choose to exit your trade? And everybody's got to come up with their own methodology because again, I think being systematic and disciplined is the single most important thing you can do. And whether that's to say, hey, I've looked at all of the historical data and if the VIX goes from point A to point B in five days, you know, that's bigger than any move we've seen in history.

[00:12:33.14] - Speaker 1
And therefore, if I'm in that trade, I should take some money off the table. You could take your instrument of choice, you know, you've shown the VIX here and obviously the VIX can't be traded, but you could take one of the tradable instruments and again, look at the history and say, you know, and, and maybe you use things like Bollinger bands or Keltner channels to identify levels and, and moves that are outside the normal set of circumstances as a way to identify, gee, this has gone farther than I would expect it to go. Maybe I need to take some money off the table. So all of the things that people who are experienced with swing trading would, would use, you know, if you're, if you're trading stocks, if you're trading equity indices, it almost doesn't matter what you're trading. You can take the same systematic approach and apply it to these volatility exchange traded products and, and, and come up with your own system. You know, what, what works for me isn't going to work for, you know, half the other people who might be trying to do this. So, you know, I, I typically don't get into any specifics when I'm talking about it other than to say, think about it like a swing trade.

[00:14:01.26] - Speaker 1
And, and sometimes, because if you're taking the short side of the volatility trade with something like SVC or S VIX or you're shorting uvixie. You know, my good friend Michael Listman, you know, is, is famous for taking the short side of the long volatility ETFs as a way to express his short volatility perspective. Sometimes being in that trade can last for a long time. You know, if we go back to, you know, that the, the bottom in S P in, you know, late October of 2023, You know, right there at the end of October, beginning of November, you know, if you said, okay, I'm, I'm going to take a swing trade here on the S P, well, that swing trade lasted a long time. And, and if you had taken a long position in aspects at that same time that, you know, trade worked really well. And again, you know, everybody's got their own objectives, their own goals. So you know, how you trade, that is going to be very individual. But you know, if, if you had a systematic approach that said, gee, that looks like a good entry point to me, you know, you can have a very profitable trading system.

[00:15:42.26] - Speaker 2
Can you, can you maybe describe. Because I think one of the big challenge in trading volatility, especially with ETFs is of course that they most likely use the futures. And therefore one of the issues with the ETF that you mentioned at the beginning, they went out of business back in 2018, is that because of the future curve, those ETF might not actually move in the direction of your desire because of the way the future curve is structured. So.

[00:16:11.28] - Speaker 1
Right.

[00:16:13.04] - Speaker 2
Yeah, maybe.

[00:16:14.29] - Speaker 1
So the, the, you know, the, the sort of easiest way to think about the impact of the VIX futures term structure on trade construction is to, is to say that, call it 82% of the time, the Vix futures term structure is in contango, meaning that the near term VIX futures contracts are priced below the longer term. Which makes sense, right? In normal circumstances, if you think about it as the cost of insurance, you know, if you need to buy insurance that for the next month versus buying insurance for the next year, buying insurance for the next year should cost more, right? Because you're covering a longer period of time, more things could happen. And so typically the, the VIX futures term structure goes from lower left, upper right. And you know, each of those contracts, it gets one day closer to expiration as the calendar moves forward. You know, so, and, and, and they will expire at a price equal to spot fix. So you know, if, if you are shorting that term structure and that term structure is rolling down day to day, then you know, that short position in the VIX futures is, is going to turn out to be profitable.

[00:18:01.16] - Speaker 1
So it's a tailwind. If you want, if you want that analogy for a short volatility trade. The, the, the difficulty or the challenge is that you can experience one of two things. There are times, there are days when the entire term structure will lift. You know, some news item, some, you know, change in the environment will get people spooked. And that term structure, the shape of it might stay the same but the whole thing may lift. You know, there's just been a, a scare in the market and, and that can be kind of a one day punch in the face. If you're short those VIX futures now, you may want to hold on to them during that period of time. But you know, that can be scary if it's not something you've experienced before. You know, let's say you bought S vix, which is a play on being short the VIX futures and you know, you wake up one day and some news item has scared people and that term structure just lifts from the front to the back. Your S VIX position is going to be down on that day. The, the other condition of the term structure that's important to understand is backwardation, you know, which we've experienced a decent amount of more recently.

[00:19:28.23] - Speaker 1
And backwardation means people are more concerned about the cost of insurance today than they are six or nine months from now. You know, we're worried about this whole tariff tantrum thing and you're going to get backwardation in the term structure, whether you're looking at the implied volatility term structure for the S P or you're looking at the term structure for fixed futures and that is a tailwind to be long volatility. But typically that condition doesn't last very long. So you know, one of the reasons that it's difficult to use these exchange traded products as a risk management component of a portfolio, you know, some people think, well, gee, I'll just have a small position in VXX or UVIX or VIXI in my portfolio so that when something bad happens I'll be able to, you know, take some profits in that. And the problem with that is that that position is going to produce losses most of the time. And so my own perspective, and not everybody agrees with this, is that there is no, there's no buy and hold use case for these products. You know, you should, you should not buy and hold SVIX as an example, as a short volume product.

[00:21:10.24] - Speaker 1
You should not buy and hold UVIX or VXX or VIXI as a way to hedge your portfolio because the cost of that hedging will be really ugly. These are tactical use cases for these products.

[00:21:30.01] - Speaker 2
Yeah, absolutely. And how do you see like options on the VIX or any other option strategies as a way to benefit from the spike or drop of volatility? And how do you use them? Maybe if you can disclose anything on your strategy.

[00:21:48.18] - Speaker 1
Yeah, so I made a decision very early on that I needed to come up with an approach that was as simple as possible and still accomplish what we were trying to accomplish. And so using options and futures created complications. Most of my clients are not, you know, super sophisticated with respect to derivative products. You know, you, to use futures you've got to get the, the accounts approved for futures. You know, there's disclosures, there's education that has to take place to make sure that clients understand what we're doing. Same thing really with options. And it's not that we don't use options or use use products that incorporate options, you know, whether that's, you know, call overriding, whether that's buffered ETFs that use options as part of a packaged strategy. But I made a decision long ago not to use futures and options as part of my volatility trading because it became clear to me that we could accomplish everything we were trying to accomplish just using the exchange traded products. And that made it much easier from an operational perspective and from a client education perspective. And you know, look, I joke that I leave the options trading and futures trading to the smart kits.

[00:23:40.06] - Speaker 1
I, I have no particular interest in competing with people who are much better at options and futures trading than I am. And the, the exchange rate, again, the exchange traded products, quite honestly, the, the, the, the experts in the field look at those and say, gee, I can do that better using futures and options directly. My response is, great, then that's what you should do and you should leave me alone, frankly. You should ignore me. You should pretend that I don't exist. Because if a Millennium pod or a Balyasney pod or a Citadel pod, you know, wants to jump into the volatility exchange traded products, one of the first things they're going to discover is that I have no problem with liquidity in trading the sizes that I need to trade. But if you were trying to trade a billion dollars or $2 billion or $5 billion in these exchange traded volatility products, you'd run into some market friction, market impact problems. So I, I'm happy to stay in my little Pond and let other people do it with, you know, VIX calls as a way to, you know, hedge a portfolio or you know, S and P options.

[00:25:14.28] - Speaker 1
Obviously that market is deeply liquid and, and, but you know, for me, this is, this is perfect. I, I, you know, and a lot of people think these products are unpredictable. They're, they're, you know, dangerous. Look what happened to XIV. Well, in January of 2018, before the Armageddon, you know, the system that I was using at the time told me to exit. So I had no exposure to XIV when Vomageddon happened. So again, I think if you know what you're doing, if you take a systematic, disciplined approach, you can avoid the major problems that will inevitably crop up from time to time.

[00:26:05.22] - Speaker 2
Yeah, and how do you, if you, if we can spend maybe a few minutes, A lot of our traders are using the VIX as of course a measure of sentiment. Can you maybe like give us some ideas on how you could look at the VIX chart and the VIX levels and understand potentially where volatility could go or you know, as we saw, you know, Vix reach 60 and then of course now in a few weeks, we are now back the same level we were before, so.

[00:26:38.19] - Speaker 1
Right. Yeah. And, and look, you know, you know, if, if you obviously, if you look back historically and I could pull it up, I don't have it by, from memory. You know, that level of VIX is, is extremely rare. And, and you know, we could argue that the 60 in August, you know, wasn't a real 60 because happened during, you know, pre market hours. So the, the VIX closed much lower on that day. But yeah, you know, you can, you can see that during COVID during the global financial crisis and, and this most recent one. So you know, if, if one of the things that people will say is, geez, you know, if the, if the VIX goes above and, and historically and statistically you could say if vix goes above 40, then I'm gonna short vix or I'm gonna go long, you know, s ps I'm gonna get bullish. And, and I think that's okay if that's what you want to do. I think that, you know, what happens though is that these high VIX readings tend to cluster. And so I think, you know, if people want to use the, a high VIX level as a signal to buy equities as an example, I think you really just have to recognize that you need to have some patience, some risk tolerance because there tend to be after shocks is what I refer to them when we get to these levels.

[00:28:27.11] - Speaker 1
And one of the ways that I look at sort of the long term track record, the long term history of VIX is to say are we in a high volume regime or a low volume regime? And the way I look at that, and it's pretty simple but it, it's been useful for me is to say what's the one year moving average of the Vix? And if the one year moving average of the vix is above 20 because 20 rounding is the long is the historical average for vix. So if the one year moving average of vix is above 20 then we might be in a higher for longer regime, a high volatility regime. We're not there right now but we've been heading that direction. You know the one year moving average of Vix is, is above 18 and it's been rising recently. If you look back historically, you know, those, what I refer to as high volume regimes, you know, there were, have been a couple of clusters, you know, going back to the late 90s into the, the crash of the Internet. You had, you know, what, what was referred to as the Asian contagion.

[00:30:01.24] - Speaker 1
You had the, a Russian crisis, long term capital management and then you went into the collapse of the Internet bubble. The global financial crisis was the next period where you know, that one year moving average of Vix got above 20 and stayed there for a while. And that was again, that was a period where you obviously had a violent top to vix but you had some aftershocks as well. You know, Covid was a very quick trip into what I call a high volume regiment. We came back out of it briefly and then when interest rates started to hike and we had the, you know, the inflation scare right in there, you got it back up above 20 again and you know, we may be headed that direction. It's hard to tell. You know, if we, if we have things calm down and stay calm then you know, maybe we'll avoid going back into this high vol regime and you know, again it's just a way to kind of frame where we might be from a condition standpoint. I, I separate things that I look at that I that are kind of, you know, a weather vein or a taking the temperature of the market a condition and I distinguish those from trade signals.

[00:31:40.10] - Speaker 1
You know, VIX above the, the one year moving average of Vix above 20 is not a trade signal but it's suggesting to me that we may see another cluster of volatility. We, we may see if it comes down with it you know, do I think it's likely to bounce back up? You know, I'm going to be prepared for it. I don't, I don't know if it's going to happen, but I'm going to be prepared for the possibility that there will be other volatility spikes. You know, if we get that moving average down below 20 for a sustained basis, then if there's a spike, I'm going to think it probably is going to revert relatively quickly.

[00:32:29.17] - Speaker 2
And another thing like, so how do you think about volatility? Maybe like we understand, I think it's very clear that volatility is kind of like a rubber band. So when we have those massive spikes, typically we see quite a quick mean reversion. So we've seen it with COVID we've seen it with also like with April, like I mean in a matter of a 2, 3 weeks ability move back kind of like to the levels. So I think it's interesting to look at those spikes as outliers for a reversion in volatility. But how do you play out when volatility is actually low and stable? And how do you look at that?

[00:33:12.06] - Speaker 1
And what type of so, so low and stable, you know, is, is, is a great time, frankly. You know, if you go back, if, if you go back to 2017, right, the year that volatility went to die, we registered the lowest level ever on the Vix in 2017. And you can see that, you know, that was the first year of, of Trump 1.0, right? He won the election in November of 2016. There was a little volatility spike around the election and then it really just kind of again with isolated little blips, kind of just went straight down. And, and if you had bought XIV on January 1st of 2017 and held it to December 31st, I'm not going to remember exactly, but you had over a hundred percent being short volatility during that period and you did have a few little scares during that year. So it, it wasn't necessarily easy to do that. But that was a period where, you know, again, as a swing trader, you had tremendous opportunity from the short volatility side. So, so those trades, you know, if, if I were to generalize the short volatility trades and you can express that as, you know, you buy S VIXY or S VIX or you short UVXY or UVIX or you buy stocks, you know, again, you can express that trade in a whole bunch of different ways.

[00:35:11.23] - Speaker 1
You, that, that was a tremendous period of time to be short volatility, obviously that had an abrupt end and it was an extinction event for xiv. But you know, if, if you, again, if you take the view, if you frame these things as swing trades or trend trades, however you want to characterize it, but you know, you're thinking relatively short term, then I think, you know, every good swing trader would have been able to avoid that spike in February of 2018. You know, you would have at least closed your short volume trade and maybe you would have flipped around to the other side, but at a minimum, you would have avoided being put out of business. And then, you know, 2018 was a pretty choppy period. You had the big spike in February and then that trended down into October where things got exciting again, again, primarily around the Fed and interest rates. And there, you know, were some opportunities at the backside of the year to be long volatility. You know, there was a great trade. I can remember, I can remember being on vacation with my family over the Christmas holidays and, and one day put in a, put in a limit order to get out of a long volatility position and came home and found out that the order had been executed and we had had a very nice little long volatility trade.

[00:37:08.24] - Speaker 1
But then again, you see that reversion, you see that that spike just didn't last very long. And then into the beginning of 2019, you needed to be on the other side. So I think one of the other problems that traders might have is at least this is my opinion, my opinion is that to be dogmatically short volatility or dogmatically long volatility is the wrong approach. To me, you need to be able to construct a system that says there are going to be times to be short and they're going to be times to be long. The times to be short may last longer. You know, again, most of 2017, it was okay to be short volatility. Yeah, you got punched in the face a couple times. Yeah, you're, you're not a volatility trader if you haven't taken a few punches to the face. But then, you know, to, to say, gee, I'm just going to take the short trades, okay, that's fine. And maybe that's good enough for what you're trying to accomplish. I think that the, the difficulty comes with people who think I'm going to use this to hedge my portfolio. So I'm going to have a long bias.

[00:38:39.05] - Speaker 1
I'm going to be long volatility as a bias. I think that that doesn't make sense to me. And, and the best volatility traders that I know, even those who are in the quote unquote tail risk business, are looking at ways that they can dial down the bleeding that takes place, you know, with a consistent long volatility position. You know, because I think the common wisdom is you, you don't know when volatility is going to spike and therefore you need to be hedged. And okay, I did not know that August 5th of last year was going to be this monumental volatility spike. But if you look at what was going on starting in mid July, you know, you could have said, gee, my short volatility trade isn't working right now, maybe I should flip it around and go the other way. And again, I think if you look at that from a swing trading perspective, if you, if you look at how VIXI and VXX and UVIX were beginning to behave in mid July, if you looked at how the futures were beginning to behave in mid July, the term structure, the changes in the term structure, you might have said, gee, this, maybe this is a time where I should put that hedge on.

[00:40:27.05] - Speaker 1
So, you know, I don't subscribe to the view that it's impossible to time your hedges. Will you get it right all the time? Never. You know, will you have trades that are unsatisfying? Will you have, you know, several trades in a row that don't go the way you want? Yes, that's the nature of the beast. Anybody who's a trader and, and has, you know, survived to tell about it has experienced 4, 5, 6, however many trades in a row that didn't work before you got the one trade that made up for all the ones that didn't work.

[00:41:16.08] - Speaker 2
That makes sense. And, and maybe like we could spend some time maybe like giving some tips and tricks on how to look at the vix like, and what are the things that you look like? For example, you mentioned that of course looking as a string trace, of course not holding, not thinking about holding position long. Because this product as we mentioned, can be very dangerous, especially with the passage of time and the change in the structure and the change in the, the future term structure contango, those are all like variables that can complicate the use of this product. But if maybe we can spend a few minutes describing on how to look at the VIX and how to maybe think about the VIX and then of course, the way you trade, it can be different. It can be, it can happen with options, it can happen with exchange trade product, it can happen with futures. But I think the most important key aspect for traders right now is like, how do I trade these markets? You know, like we see swing moves that are like 2, 3%. We've seen a 10% move in the index on a single day.

[00:42:28.10] - Speaker 2
Right. So managing this kind of level of volatility can be very difficult, especially for those who have not experienced it.

[00:42:36.23] - Speaker 1
So you can put this up on your chart. It's the ratio of VIX M to vixi. And so you know, what you can see and what I do is I look at this really as a, just a line chart and then I put a couple of moving averages on it, you know, so, so let, first let me go back and say, so VIX M is the medium term, VIX futures exchange traded product and VIX is the short term. So really what you're taking, you're taking a snapshot of the futures term structure. You're saying, how does the midterm look compared to the short term? And so as, as a proxy for the term structure, what this relationship does is it mirrors what the S&P 500 looks like. If you overlay the S&P 500, it would look pretty similar. And so one way to frame this up is to say, I'm going to monitor this relationship and again, use it as a way to frame a trade. You know, if you could use, you know, sort of my favorite little moving averages are, you know, an 8 EMA and a 21 EMA and just say when I get a crossover.

[00:44:58.02] - Speaker 1
Yeah, moving average exponential you can do simple, doesn't matter. But you know, so, so use this as a way to distill what the VIX futures term structure is telling you. And you can, you know, you can identify places in sort of inflection points, if you will. And again, moving averages are a way to smooth out the noise that you get with, you know, almost any signal. So, you know, this is one of my favorite ways to look at the behavior of the term structure and how to turn it into a, how to take the noise and turn it into a signal. Does it work all the time? No, nothing ever works all the time. But again, if you kind of map it, you can say, gee, you know, if I've been paying attention to this, then, you know, maybe that thing that happened in August of last year wouldn't have been such a surprise. You know, maybe what happened in earlier this year wouldn't have been such a surprise because the term structure was telling you that. People were positioning for the S and P to go down you know, so that's an example. And, and you know, in my sub stack, you know, I've created this composite called the VIX mix and this is one of the components of that composite.

[00:47:02.29] - Speaker 1
So if this is one of the indicators that I use to assess the overall condition of the market from a volatility perspective.

[00:47:16.13] - Speaker 2
That'S very interesting. Thank you, thank you for sharing this. And I think we have a few minutes left. So let's see. I don't see any questions from the audience, but maybe like, I don't know if we miss anything that could be important for, especially for traders looking to stay ahead of volatility, maybe we can spend the last few minutes talking about that.

[00:47:37.28] - Speaker 1
And you know, I think the hardest part, and again, your, your audience are pretty sophisticated traders, so they're accustomed to experience, you know, cuts and, and punches and risk management, you know, so again, I think that the challenge here is that, and it seems kind of silly to say, but volatility is volatile. If you look at a product like sfix, right, which is an inverse volatility product, you know, it's, it's typical relationship to the S P is, you know, sort of 2x. So if the S P goes down by 5%, this is going to go down by 10% or more. You know, so it exaggerates. You know, you look at that, you look at that move last August, you know, if, if you owned S VIX and you didn't understand, you know, and, and let's say you bought it back in November of 23, right? And, and so you've taken it from 10 to 50, you've made five times. Well, am I looking at the right act? Yeah. So you've, you've made a. Now would you have been able to hold it through those pullbacks? Probably not. But you know, again, if you were not paying attention and you just continue to hold on to it, you gave back, you know, a massive amount of profit.

[00:49:29.15] - Speaker 1
So these instruments are very volatile in and of themselves. They obviously express volatility and they're very volatile themselves. So, you know, again, this is something you need to pay attention to every day. This is not something that you can say, okay, this, this month I'm going to be short volatility and I'm going to buy this S fix thing and I'll check it at the end of the month. You know, these are products for active traders, for people who understand risk management, for people who understand position sizing, people who understand how these products will respond in different market environments. You know, a Lot of people think, oh, this is just the next version of xib. Well, you know, there's an element of that. But I happen to know the people who developed Aspix and they, you know, made some meaningful changes to its construction and the way it executes its trades every day to reduce the possibility of an XIV event. There's nothing, you know, if, if you think that it can't go from 50 to 20 in a week, then you're just not paying attention. It can go to 50, from 50 to 20 in a week.

[00:50:55.24] - Speaker 1
It did it.

[00:50:57.05] - Speaker 2
Yeah.

[00:50:57.22] - Speaker 1
And, and, and it's not because there was anything wrong with the product. It's because there was a massive volatility spike and a massive. And a very significant pullback in the S P. So, you know, those things are going to happen and if you're not prepared for it and if you don't have a systematic approach to say I'm out before that happens. Right. Whether it's a stop loss, you know, whatever your risk management system involves, you need to have a risk management system in place before you start trading these things.

[00:51:34.08] - Speaker 2
Yep. Awesome. I think we went over quite a bit and I really thank you for the time, Jim, and of course, for those who want to look for your content and, and follow you, here is your X profile. So really great content. We follow you every day and we're very happy to have you on our live sessions. So again, thank you for your time and I hope to see you another time very soon and maybe we can talk about some different scenarios when that happens.

[00:52:11.01] - Speaker 1
Great. I appreciate the invitation. Happy to be here and I hope it's helpful to your audience.

[00:52:17.17] - Speaker 2
Absolutely. Was very hard for. Thank you so much and have a great day.

[00:52:20.23] - Speaker 1
Cheers. You too.