VIDEO
HIGHLIGHT
Log InSign up
Cem Karsan - Insider’s Guide to Volatility Hedges
SummaryTranscriptChat

Cem Karsan - Insider’s Guide to Volatility Hedges

Introduction

This section introduces the Mutiny Investing Podcast and features a conversation between Jason Buck, CIO at Mutiny Fund, and Jem Carson of Egea Capital.

Introducing the Mutiny Investing Podcast

  • The podcast features long-form conversations on topics relating to investing markets, risk volatility, and complex systems.

Conversation with Jem Carson

  • Jem Carson is the Managing Director of Egea Capital.
  • Egea Capital specializes in volatility arbitrage.
  • The conversation will cover long convexity, long skew with long vega, Garyvana, and charm.

Background

This section covers Jim's background.

Early Life

  • Jim grew up in London but spent every summer in Turkey. His parents are Turkish.
  • He moved to Texas as a child because his dad was an oil industry PhD structural engineer.
  • He lived all over the world as a kid and went to prep school on the east coast to Andover.

Education

  • Jim studied financial mathematics along with policy at Rice University.
  • He debated whether to go do school of foreign service or really go to the math quantitative side which was always his other leaning coming from his structural engineer father.

Trading Experience

This section covers Jim's trading experience.

First Job Trading

  • Jim started trading full-time in 1999 after getting his first experience during the summer of 98 right after Long-Term Capital Management's collapse which informed a lot of his view of supply and demand.
  • He started in the pits in Chicago and moved into an important role at RBC Dominion Securities as head of equity options really early two years in because the gentleman in front of him left and started a proprietary trading group here in Chicago Belvedere.

Starting a Market Making Firm

In this section, the speaker talks about how he started a market making firm and grew it to become one of the biggest market making groups in the indices.

Starting a Business Forum

  • John Mulhern hired the speaker to start a business forum for Bear Stearns.
  • The business forum was built out to almost 30 traders across various exchanges.
  • The speaker's goal was to diversify away from their specialist business.

Building a Market Making Firm

  • After leaving Bear Stearns, the speaker started his own market making firm with some colleagues.
  • The timing was good as the bull markets were picking up in late 2007.
  • By 2008, they became one of the biggest market making groups in the S&P 500 and indices.
  • They grew their several million dollar investment into many multiples of that number.

Transitioning from Market Making to Investing

In this section, the speaker talks about his transition from market making to investing and starting his own hedge fund.

Exiting Market Making Business

  • After selling his market making firm, the speaker decided to take a step back from market making and start investing his own money separately.
  • He managed his own capital on the side with a structured trade that diversified his long real estate and equity positions.

Starting GIA Capital

  • The structured trade made him realize there was an opportunity for other people to join along.
  • He talked to friends who encouraged him to bring on other investors, which led him to start GIA Capital in 2011.

Being an Entrepreneur vs. Being a Trader

In this section, the speaker talks about being an entrepreneur and a trader, and how he enjoys building things, teaching, and working with employees.

Being an Entrepreneur

  • The speaker enjoyed being an entrepreneur because of the part about building things that really appeals to him.
  • He also loves teaching and working with employees to build a better mousetrap.
  • He learned from other people as well.

Being a Trader

  • The speaker had to be both an entrepreneur and a trader.
  • He bridged the divide between being an entrepreneur and a trader because he had skills in both areas.

Starting GIA Capital

In this section, the speaker talks about starting GIA Capital after selling his market making firm.

Starting GIA Capital

  • After selling his market making firm, the speaker started managing his own capital on the side with a structured trade.
  • He realized there was an opportunity for other people to join along after talking to friends who encouraged him to bring on other investors.
  • He took some time off before starting GIA Capital.

[CUTOFF_LIMIT]

Video description

Episode 24: Cem Karsan - Insider’s Guide to Volatility Hedges In this episode, we talk with Cem Karsan, CIO and Founder of Kai Volatility Advisors (formerly Aegea). After his successful trading career, Cem decided to leverage his volatility arbitrage expertise by improving upon many of the flawed strategies he had witnessed during his tenure as a market maker. To that end, Kai Volatility Advisors has created a non-correlated and scalable investment vehicle that takes advantage of the structural mispricing inherent in option indices worldwide, while offering the superior transparency and liquidity that today’s investors demand. We talk about Cem’s experience as a market maker and how that affects how he thinks about trade flows. We dive into the 3 components to his strategy: 30 day skew, dispersion, and VVIX. We also discuss how dealer hedging can affect Vanna and Charm, which can pin the index or exacerbate moves depending on their hedge positioning. I hope you enjoy Cem’s insights as much as I did... Connect with Mutinyfund: Twitter: https://x.com/MutinyFunds Linkedin: https://www.linkedin.com/company/muti​​​​... Email: invest@mutinyfund.com https://mutinyfund.com/​​​​ Disclaimer: Futures and options trading involves a substantial risk of loss. You should therefore carefully consider whether such trading is appropriate for you in light of your financial condition. Unless distinctly noted otherwise, the data and graphs included herein are intended to be mere examples and exhibits of the topic discussed, are for educational and illustrative purposes only, and do not represent trading in actual accounts. Opinions expressed are that of the author. The mention of specific asset class performance (i.e. S&P +3.2%, -4.6%) is based on the noted source index (i.e. S&P 500 Index, etc.), and investors should take care to understand that any index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history. DISCLAIMER This video provides information regarding a commodity pool known as The Mutiny Fund LLC (the “Fund”), which is managed and operated by Attain Portfolio Advisors LLC and Black Pearl Management LLC (the “Manager”). TaylorPearson.Me is a registered DBA of Black Pearl Management, LLC. Investments in the Fund are only available to Accredited Investors as defined in Rule 501 of Regulation D of The Securities Act of 1933. This content is being provided for information and discussion purposes only and is qualified in its entirety by the information included in the Fund’s offering documents and supplements (collectively, the “Memorandum”) described herein. Any offer or solicitation of the Fund may be made only by delivery of the Memorandum. Before making any investment in the Fund, you should thoroughly review the Memorandum with your professional advisor(s) to determine whether an investment in the Fund is suitable for you in light of your investment objectives and financial situation. The Memorandum contains important information concerning risk factors, including a more comprehensive description of the risks and other material aspects of an investment in the Fund, and should be read carefully before any decision to invest is made.