Blog Posts

Volatility term structure trading involves strategies that take advantage of the differences in implied volatility across different maturities for options on the same underlying asset. The implied volatility term structure (IVTS) refers to the relationship between the implied volatilities of options with the same underlying asset but different expiration dates.   Key Takeaways – Volatility […]

Volatility targeting is a trading and portfolio construction strategy that tries to achieve a desired level of volatility by dynamically adjusting the allocation of assets. This approach helps in maintaining a consistent risk level, which can lead to more stable returns and better overall discipline and risk management. Many institutional traders set volatility targeting levels […]

Commodity Yield Enhancement (CYE) strategies are designed to improve the returns on commodity trades or investments beyond the typical spot price movements.  These strategies leverage various financial instruments and market mechanisms to better optimize returns and manage risks in commodity markets.   Key Takeaways – Commodity Yield Enhancement Strategic Roll Timing Roll futures contracts at […]

Sector beta arbitrage is a trading strategy that tries to exploit mispricings between different stocks or sectors in the stock market based on their risk levels. This strategy leverages the concept of “beta,” which measures the sensitivity of a sector or stock’s returns relative to the overall market. Sometimes the strategy means, more generally, the […]

Precious metals spreads involve trading the price differences between various precious metals, such as gold, silver, platinum, and palladium. Traders exploit these spreads to profit from relative price movements rather than the absolute price changes of individual metals.   Key Takeaways – Precious Metals Spreads Precious metals ratios reflect substitution potential between, e.g., gold and […]

Precious metals arbitrage involves exploiting price discrepancies in the market for precious metals like gold, silver, platinum, and palladium. Arbitrage strategies can be implemented across different markets, exchanges, or products to capture risk-free profits. These strategies leverage differences in prices that should not exist in efficient markets due to supply and demand equilibrium.   Key […]

Arbitrage exploits price discrepancies in identical assets in different markets to secure risk-free profits (given perfect conditions). The “arb” strategy hinges on the ability to execute transactions quickly to exploit these temporary mispricings. This makes it a low-risk, low-return approach. Relative value strategies focus on identifying price mismatches between related but not identical assets. It […]

Macro-to-micro analysis involves examining economic conditions and trends on a large scale (macro) and then translating those insights into more detailed, specific contexts (micro). This method is widely used in economic and financial analysis to understand how broad economic forces affect individual sectors, companies, and even specific assets. It often involves having a certain structure […]

Junk bond arbitrage is a strategy in the fixed income market that exploits price discrepancies between high-yield bonds (also known as junk bonds) and other financial instruments. This strategy involves buying undervalued junk bonds and simultaneously hedging the credit risk by shorting equivalent instruments or using derivatives. The goal is to profit from the price […]

A sovereign wealth fund (SWF) is a state-owned investment fund that is composed of financial assets such as stocks, bonds, and real estate. These funds are typically funded by a country’s foreign exchange reserves, which are made up of currency, gold, and other financial assets that a country has acquired through trade or other means. […]