Is Managing Volatility Really An Asset Class?
Richard L. Selvala, Jr., Harvest Volatility Management, LLC
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Transcript
00:00 Hey, Rick, how you doing?
00:02 Good morning, Joel.
00:03 Doing great.
00:04 Good, good.
00:05 So just a little background.
00:07 He is the founder and CEO of Harvest Volatility Management.
00:11 So I just want to talk about volatility in a broad sense here, because you talk about
00:16 asset classes, right?
00:18 And Bitcoin burst onto the front.
00:21 Many are considering that a new asset class.
00:24 Where do you put volatility and managing volatility?
00:27 Is it truly an asset class?
00:29 Yeah, people make that argument and I can make the argument.
00:34 You can certainly have a strategy where your returns are based on managing volatility,
00:42 changes in volatility, views on volatility.
00:45 And so you certainly have hedge funds that are volatility based.
00:49 You can look at things like the VIX, which is negatively correlated to the S&P, which
00:56 makes it interesting to many.
00:58 And there are other advantages of volatility.
01:01 And really what we trade is more options.
01:04 And so we trade options on the S&P 500.
01:08 And so volatility is a big part of what we do, but we don't trade volatility as an asset
01:13 class per se.
01:14 We use options to try to reshape the return distribution.
01:19 So if we can cut off the left tail of returns or if we can add some incremental yield in
01:28 a hedged fashion.
01:29 So we really use options to help reshape and try to improve the return stream of a client's
01:35 portfolio rather than really trading volatility as an asset class.