March 9, 2018 / 7:50 PM / in 10 months

U.S. stock market volatility gets derivatives conference hopping

BONITA SPRINGS, Fla. (Reuters) - February’s wild U.S. stock market ride brought a higher tempo and some must-hear presentations to the often staid discussions at the Cboe’s Global Market Inc’s major annual derivatives conference.

In the shadow of the February plunge in stock prices and their more than two-thirds recovery from the decline, focus was on the dramatic demise of some funds as well as strategies that bet against market turbulence.

One pair of presenters at the 11th hour ditched a presentation titled “How to hedge when markets no longer fear risk” in favor of one called, “Trading volatility through the bubble and beyond.”

“It’s injected a bit of excitement into the conference, at least to the extent you can get a bunch of old options hands excited,” said Benn Eifert, founder and chief investment officer at QVR Advisors.

There were others who had to dash to book a seat at the Cboe’s CBOE.O Risk Management conference.

“I had been following the short volatility trade for a long time, even though we trade equities and are long only,” said Yuda Goodman, trader at Redwood Investments, LLC, located just outside of Boston.

“Then when everything happened in February, I was like, ‘Whoa! I really need to register now because it affects the whole market,” he said.


A 4-percent, one-day drop for the S&P 500 Index .SPX on Feb. 5, led to the largest ever spike in the Cboe Volatility Index .VIX, the most widely-followed measure of expected near-term swings for U.S. stocks.

The shock rang the death knell for some popular ‘short volatility’ exchange traded products (ETPs), including the VelocityShares Daily Inverse VIX Short-Term Exchange-Traded Note, and launched a flurry of questions about what transpired on Feb. 5.

The shuttering of LJM Partners Ltd, a Chicago-based fund manager, after near-total losses in last month’s volatility shock, dominated conversations.

Attendees were delving into the reasons behind the collapse of these strategies and what could come next.

“The whole conference has been a post-mortem,” said Anand Omprakash, director of equity and derivative strategy at BNP Paribas.

Still, in the wake of the hit to the short volatility trade, conference organizers said registrations fell to 279 from 300 in 2017.

“If they got blown out, they are probably not going to show up here,” said Matt Amberson, founder at Chicago-based volatility and options data firm ORATS. “There’s a bit of a survivorship bias here,” he said on the conference sidelines.

Reporting by Saqib Iqbal Ahmed; Editing by Daniel Bases

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