@OneHotCode1 Had this discussion a few times in equities space, mostly bank prop (CRB, d1, …). Observation: slower (daily+) quant systematic strategies/overlays display short vol behaviour in extremis, even as standard equity portfolio decomp’s don’t show the exposure. Assumption: crowding

@afekz @OneHotCode1 Any price referencing systematic strategy (basically all) has agreed in advance to execute certain behaviors tied to change in price (absolute and relative). This means they’ve sold options that execute in a definable period of time, leaving almost all short vol.

@profplum99 @afekz @OneHotCode1 A priori this can’t be true because you can imagine a systematic strategy which is “do the opposite of what the first systematic strategy does” and they can’t both be structurally short volatility.

@macrocephalopod @profplum99 @OneHotCode1 Penny for your thoughts on the original above?

@afekz @profplum99 @OneHotCode1 On the original original post, or your reply? It does seem empirically true that many systematic strategies lose money in volatile times. There are many possible explanations — 1. The strategy is explicitly short volatility (via options) 2. It’s implicitly short volatility (eg

@macrocephalopod @profplum99 @OneHotCode1 If you’re willing, more on your point 2? (“Assumption” I referred to in my reply was basically 3 & 4 somewhat conflated.)

@afekz @profplum99 @OneHotCode1 A mean reversion strategy increases its position sizes as it loses money, and closes winning positions quickly (opposite to a trend following or momentum strategy). This creates a negative skewness on individual trades (many small winners, a few big losers) it also creates a

@macrocephalopod @afekz @profplum99 @OneHotCode1 Why is nobody talking about timescales? I have a weekly systemic strategy which gets hosed on fast changes in market direction. I have an intraday trend following strategy which thrives on those. What’s my vol positioning?