Alpha Exchange Shailesh Gupta, Head of Structural Alpha, Simplify Asset Management
Nov 5, 2024
Shailesh Gupta, Head of Structural Alpha at Simplify Asset Management, shares insights from his expertise in derivatives and carry strategies. He discusses the intriguing concept of "carry" in financial markets, explaining its significance in option trading. Shailesh outlines risk management lessons from the VIX products crisis and emphasizes innovative yield-enhanced ETF strategies. He also delves into navigating interest rate volatility and the dynamics of bond markets, providing listeners with a clear perspective on trading in today's challenging environment.
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Positive Carry Example
- Positive carry is when an asset generates income exceeding its cost, like a low-interest mortgage and high-yield savings account.
- Financial markets focus on excess carry, the return above the risk-free rate.
Currency Carry Trade
- The Yen carry trade, borrowing at low Japanese rates and investing in higher US rates, exemplifies currency carry.
- Carry acts as a tailwind or headwind depending on the trade's direction.
Carry and Volatility
- Carry trades are implicitly short volatility, benefiting from steady markets.
- Popular carry trades, like being long USD/JPY, become vulnerable to sharp reversals.