27. June 2024 RCM options 0 Comments Like it
Podcasts,,VIX and Volatility
In this episode of the Derivat we chat with Gary Selz@Selzgary, CIO and CO-PortfolioManager for Zero Delta Funds.Gary shares his background, which grows up in Chicago and study technology at Northwestern University..Gary discusses his experience with training a new trader at the Prop Company.Shops, from poker players to accounting people.Not always where you could expect.
Gary emphasizes their process of finding under the radar international traders and evaluating their Sophan potential future market catalysts.
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See old episodes controlled for more volatilityVolatility Playlist on YouTube!
Follow Gary on Twitter@Selzgary, look at himer LinkedInAnd make sure you visitzerodeltafunds.comFor purely information.
Check the full transcription of this week's podcast below:
Volatility vultures: hunting Options Talent with Gary Selz from Zero Delta
Jeff Malec00:06
Welcome to the derivatus with RCM alternatives, where we dive into some alternative investments.Back this week and speaks volatility and opportunities with Gary Selz, co -founder of a unique basis of foundations that focus on optional actions of hooks and hooks about rep trading world.A manager.Hearing stories about the props that are seen in Chicago.And of course, asking the question, they always manage the book to Zero Deltas, this episode will be applied to you by RCM's YouTube channel where we have this podcast some other videos in and around our work in the ball room.So continue to YouTube, search RCM -Derivat -Podcast and press the playlist button and you can see all our Volpods over the years in VIX and Volatility Playlist.and to the show.okay, we are here with Gary.Gary,How are you doing well?
Gary Selz01:24
It's nice to be here
Jeff Malec01:25
I know.And as it happened a few times about this, you are here in Chicago, but we still do this on Zoom,
Gary Selz01:31
Yes, yes, Chicago.And have you met personally for the first time, and now I am in my hotel room and do this podcast.
Jeff Malec01:40
We will find out one day.
Gary Selz01:49
I grew up in Chicago.I was here all my life until Covid hit in 2020 and that year I moved to Miami
Jeff Malec01:59
Nice.
Gary Selz02:03
Not really.I miss the city.
Jeff Malec02:13
And everyone says that Miami is becoming a hedge fund city.
Gary Selz02:22
A bit of both.Things, it's down there, yes, not, I don't think they are a hedge fund, but yes, it rises.From Palm Beach to Miami.I would say it is transforming, but it is slower.
Jeff Malec03:08
Yes, and where were you in Chicago?
Gary Selz03:13
I grew up in Skokie, so I went to high school there, then I went to the university in Northwestern in Evanston and then got a job in the city, had a plug -company,
Jeff Malec03:24
Correct?Um, will be a bit in this stuff firm. Yes.
Gary Selz03:33
It was interesting.So I studied electrical engineering in northwest and let me tell you it was difficult.
Jeff Malec03:41
Appeared a sphere.
Gary Selz03:43
I avoided a bullet.But in my studies they had a financial engineering course on the engineering, so I signed up.All reviews said it was extremely difficult., Prices of Swap, with all the calculation, you know, the brownic movement, physics, everything involved.An exam an exam day and I said you know this is interesting, but can you earn money with it?And he sent me an e -mail about a company in Chicago called Peak Six and they had an open house.They did that and I was blown away.I wanted that job in the first place.
Jeff Malec04:48
Right, when you enter the office, you will be blown away.Comes?Was it or what name of this well there and looked through LaSalle Street.
Gary Selz05:10
Yes, it was fantastic..
Jeff Malec05:29
Really, and you were just a total beginner.
Gary Selz05:33
And since then, you know, the rest is history.
Jeff Malec05:41
Talk a bit about it.Did you immediately receive capital to act?
Gary Selz05:56
Oh, no, they have one that you know, in such companies, many of those you know, susquehannas in the world, optivers, IMCS, they have all the training programs where people come in, are hungry that are smart and they train them so thatThey train them in Optionsory.de may do something spotted trade.Showering dealers.Act ideas and always get feedback.In some stores.But you are not, certainly not a book with the same.You have to learn, and then you would ultimately, gradually, know that you are part of a trader -assistant -class small book and they see how you do it., in a sense and control your deductible and take yourself well.Well, you know that there are different times on the market, there are different options.So maybe not a great opportunity for you.So it just depends on, how are you, how do you navigate it?Manage the risk?So there is everything involved.
Jeff Malec07:49
As a quick way out of the program, right?If you want, oh it's not good chances.Do you have an electrical engineering?
Gary Selz08:03
I received electrical engineering engineering.It was actually a focus on wireless communication.It is based on brown movement.That is how, how stores are modeled.
Jeff Malec08:56
Which other or in your experience with other options, right?Guy was an electrical engineer and talks a bit about it, about similar, some of the broad career paths that they brought for Plug
Gary Selz09:19
Stores like it.The way people think, the poker players thought in a different way and in fact they are very accurate in how they place their efforts, the size of the effort and risk management.A lot to bet on the counter, you know the risk versus the control reward.And they are big and they are good.Professional poker players to act.
Jeff Malec10:16
Just like Poker's black Monday.I think you made that decision, and they called it their own black Monday, exactly.I don't know if it was a Monday, but it's one of them.
Gary Selz10:25
And some of these people, you know they went to companies such as, you know, chicago, propstiners, companies in New York, and I know a few, they have become big dealers and they had no background in trade,No background information options, but they learned and they were hungry and they succeeded.Some of them were more algorithmic, more automated, but others are still very discretionary and very profitable.You don't let everyone look at something exactly in the same way, yes,
Jeff Malec11:02
But it's confusing.Hello, you know how to think.Here is the playground and see what you can do in the playground here it is
Gary Selz11:21
Definitely the last.Outside of that.And I think it's the same with trade, you know and especially discretionary opportunities.There are people who are just fantastic.You know that Michael Jordan had that some of the other basketball players did not have and it is difficult to show something accurate.He's better?
Jeff Malec12:23
versus care
Gary Selz12:30
Right, yes, anyway.And I still don't know what it is.As a trader I knew that some traders were better than me.Their loser shortly earlier.I don't know what it was, but there are dealers who are simply better than others.
Jeff Malec13:08
And then one of my favorite stories that are like a market production where you make markets, Gary can throw this Pingpong Bold 50 meters to the Muurstraat probably.and,
Gary Selz13:27
O I,
Jeff Malec13:29
Each of the stories you can share.Oh yeah,
Gary Selz13:34
We had a game.I don't know who introduced it.How many miles to the moon.And the traders would start with games, sometimes and we become creative, they start to act with their possibilities.Do this probably a few times a week and it was very nice.We will also, you know, shopping.There was a basketball brace.
Jeff Malec14:14
Now we have, I think it's around 350,000, I want to make my market 300,000 miles,
Gary Selz14:22
You know we can do it, let's
Jeff Malec14:23
Google it.
Gary Selz14:24
There is another one?
Jeff Malec14:27
The other, eh, how often do you have to fold a piece of paper to reach the moon?not?Because it teaches you as not -Linearity, right?right?
Gary Selz14:51
So the answer miles to the moon 238,000, so you're pretty close, okay?trade.
Jeff Malec15:03
Was not an official thing.
Gary Selz15:10
Yes?And she, I think companies might start doing it as part of a formal training, yes, but it was just fun for us.
Jeff Malec15:26
And then talk a bit.My own shingles, do my own things, against some drinking cabbage help or whatever it is, or they are very well compensated.
Gary Selz15:52
In general, I think it is not so much that dealers think they are so good that they can leave, I think it is more a mentality that they want to build something themselves.And I think there are only two camps.Want to do it and then there are people who just don't do it.Just a mentality.And some other people just have a mentality.I want to build something myself.They run from optiver.de creates a kuna, you know they have visions of something big.Just a mentality.
Jeff Malec16:53
They can be like, hi, I know I want to earn less money, yes, but I want to be my own boss.I will have my name on the door or whatever, absolutely,
Gary Selz17:00
Absolute.And there are people who are more dependent on the technology of many of these plug companies and there are people who are not, so they feel more look at them
Jeff Malec17:12
Exactly, whether it would cost them $ 2 million a year to have the technology in place or something similar.
Gary Selz17:19
Or they should build it up, it would be a major extension, it won't be that good., Susquehanna, Peak Six, Springhandel, whatever it is, it's really good.Big banks that
Jeff Malec17:50
You think it gives an advantage only in terms of speed, in terms of prices, all the above,
Gary Selz17:55
All the above.It's a lead.This is a big lead
Jeff Malec18:00
Not what we were talking about, as high -frequency trade and parabolic bowls pass on to quotes and such.
Gary Selz18:08
Yes, some companies still have it.And co -location, the costs of everything that is huge, the costs for some of these companies are hundreds of millions of dollars per year for all servers, all connections, all microwave frequencies, regardless of what it is, yes.
Jeff Malec18:25
So yes, microwave towers, no satellite towers, but maybe they were yes, also satellites. Yes,
Gary Selz18:30
The satellites were slower or something again.But even microwave towers you had to wind, wind speeds because the towers shake.
Jeff Malec18:44
My quote from a millisecond, but the top of six and not?I know something about it.
Gary Selz18:55
Don't know.I've been there for eight years.
Jeff Malec19:09
On that, and then we also get that there are smart people in all these places.The highest six dealers or fighting against the Gene Straight Man, isn't it?
Gary Selz19:29
Some points think you are a robot versus robot, professional versus professional.I think it has been very different in the last five years, or four years, the distribution of retail options has exploded.Stock those calls overwrite.I think there is a lot.I think the yield Max has a number of these.are just many more different players.There are also many more products.of the professional versus professional.But now I think there are so many more different players.There are large settings in options.I, and they were long, short stock fund, billion dollars positions, several billion dollars positions, in Namur.In the following that you know, he is three months, it will be within this interval.A position that you have to sell to sell 5000 of these straddles.They buy a lot of Up -Settings in Big Cap Tech.So that's just another player.To do things for different reasons, whether they overwrite, whether they speculate and they are big
Jeff Malec22:03
And then in the back of our poker speech, just like the poker analogy is that you have the six benefits.In principle there are now a few tourists in, and maybe a large editions, company boy comes in and loves, okay, now have some new money in the game that we can shop and come around.
Gary Selz22:30
Yes, and not everyone's trade volumes, for example, you know, some people overwrite, so they just want that advantage.Options.So they are more, they are a little more price sensitive, but they are not full of full, yes, so they can say that an option is $ 1, but you are like, wow, the full it is $ 1, it's cheapIs for what I think the stock could do.So many players.You know that you are dealing with the shares, you are dealing with the chance, the trade volumes of this person, the trade direction of this person, that there can be many winners at the same time.
Jeff Malec23:19
Would be a simplified model like Jeppy, and what we say, J, E, P, Y, I think, is the signal, right?They sell calls against s, p, essentially, yes, they sell calls.It is reasonable to say that the strategy would return in a vacuum more, maybe 1% more per year or something, or 50 beeps a year more.Jeppy. Totaal, simplified vision, but yes,
Gary Selz23:52
So Yeppy, so let's say they sell that call, right?, let's say you are the prop company, you buy the call that you think is a cheap full, maybe you realized it in your dynamic coverage over time, you can do different things.Cheap.A lot of.I don't think it's just one person against the other.
Jeff Malec24:42
It is a podcast that we make easy to make five or five Boogeyman.Go a long way, yes I
Gary Selz25:00
Leave in 2016 and took a year off and tried to find out what I wanted to do.Was absolute return in nature, but usually did well under market volatility.These dealers who had these strategies were usually capacity restricted, so many institutional prices they simply overlook.Millions, so they have no trouble, but the strategies were also quite complicated for only high net value.Money, or a lot of their own money, and family and friends money, maybe they have 20 million.And for a hedge fund, many people say that you cannot run a hedge fund of 20 million.No, yes, that you can be slim and run hedge funds of that size, because if you have a good return, you live well.Have the same risk silosophy as me.If there is nothing to do, you should not do anything, keep the capital, and if there is something to do, you have to beat it.And I did well.My partner, Chris, ended after he had left a prop company and he also invested his own money.Come and all others.So we made this device, Zero Delta Funds, in May 2021, and we have had it since we have only launched it with our own money.Capital.Yes.
Jeff Malec27:47
The concept is, as you are back, say that you can place all the traders in a room over all the props and you sit there at that desk and as if I like what this man does, I like what this man does.I like what the guy does and chooses them that way and they have already left the Prop company.Company.For some they have to deal with the trading company with their own money.
Gary Selz28:16
Yes.And we don't even ask these dealers to come.I don't want to convince anyone, yes, you know that it is part of our due diligence process is that they have the confidence and the will to do something alone?A fast company.
Jeff Malec28:58
And after their thinking, what do you look at what are you looking at?
Gary Selz29:06
Yes, certainly tell me about the strategy.What do you act?Suppose we are dealing with opportunities.So they may be able to spread, they can possibly act with a single stock, relative value, equity full. The can be a tail strategy.But if they try to do all these things as soon as they are not a specialist.So we try to choose people those specialists.So, for example, we just have a full -dispersion specialist.We may also just have a hedge specialist, then we might just have a Zero DTE specialist.And so we look for groups.Specialists because they concentrate on one thing, and then they usually have no strategy operation where they try to do something else.We are not managed account investors, yes, so it is a big thing for us, and we have actually avoided strategy operation by choosing specialists,
Jeff Malec30:21
And then you want them to have a skin in the game and have earned enough money elsewhere where they don't put pressure on to do something in a flat period, yes,
Gary Selz30:32
But not necessarily.We are a little different.It is also not very rich.In their fund when they start 100% of their assets.So they are all together and it is also very reassuring for us where they believe so much in themselves and their families, even you know who puts it differently?Are your parents.
Jeff Malec31:32
We as an industry as a group as a group, interchangeable, for example options, vulhabters, yes.How do you see the difference?Agree on full -dealers.So what is the difference?
Gary Selz31:53
An option trader could be full the dealers, are options that dealers, okay, but not all options that dealers are, so someone who is a full -business man, looks at the actual full for whatever reason, and they try this partto insulate and catch the full.A commercial trader could look at different things., you can say that I have a condition that there is a voltage risk premium, but perhaps the index tends to trends during the day, whether I look at the commandment, ask for spreading expansion or collapses in hero day..
Jeff Malec32:58
Or just like a simple bull -call spread or something like, yes, yes, look at it,
Gary Selz33:02
If you look at different structures, Broken Wing Smuggler.And why does it work?T On the way is killed, but I could benefit from a full -doll, various things like that,
Jeff Malec33:23
And full of cheap.alad us nowadays use everyone's favorite inventory, nvidia, right?So I don't even know how it is likely.Minus gamble, it's like a 40 full or something or 60
Gary Selz33:35
Yes, I don't even know, but I think a 40 maybe
Jeff Malec33:38
Ish, let's call it right?So if you say boys want to shop the ball or they think balls use cheap nvidia.Movement but probably does it mean?120% annual movement or something, 16 times 440, 240%
Gary Selz34:02
It is a depends on how you discover it.But in general 40 full of intended as a 2% movement every day. Yes.
Jeff Malec34:08
So they say, hey, this is two.He went.I went the other side 99 since 2% a day is much too small, which it seems that it would be good.that it would be more unstable in the future,
Gary Selz34:38
Namely.And you praise a full based on the past, just as you predict.Half -conductors, is a different environment than three years ago.or.or.Or something has changed five years ago.NOW.About what these shares are doing now.Look at it and Lijd, Disney is a 20 -full name, but if they want to stream, you know who streamers are, Netflix?Future, maybe it should be like a 23 fullav.Of all these little things in what you do, you give you a lead.And I think many of these dealers are looking for different types of crooked.
Jeff Malec36:11
And then you have revealed a few boys like you, what did we talk about yesterday?Tell yes.I like it, yes, tell me.
Gary Selz36:24
I was with a group and we asked them, you break you full, p and l versus your gamma and your theta, p and l?You earn money if you don't.Then you do the same question??I was like, I love this guy, not?
Jeff Malec37:24
If they are really advanced or if they are just stimulated something well, you want to travel.You fly to France and meet a trader.
Gary Selz37:35
Yes, we are a bit of a different form of funds in the sense that we usually do not invest in the large, well -known managers..So we are like, I am sure you have seen or read the book Moneyball, yes, we are those who go to the Dominican Republic, Venezuela, Japan, South Korea, but we go to the baseball players.Places that are not typical of finding options.We go to France.Nu.france has a very good derivative background from the French banks.We go to Amsterdam.Amsterdam have many options that go to Asia, different places there to find people who deal with different things.We go everywhere to find dealers and we find them through our Trader Network.We are also very active on LinkedIn, find people who have previously traded for a large company and just see what they do if they do something else now and send them a message.
Jeff Malec38:51
I love it and how many are there now in the portfolio?
Gary Selz38:56
At the moment we have designed an eight -manager portfolio that I would never see that I was probably more than 12.There are in the bullp that act a little differently than what we are usually used to, so to make a few, but there are now eight.
Jeff Malec39:15
And have you just not done anymore?
Gary Selz39:28
Yes, we try to balance it a bit just because we are not good, we will earn money in other full strategies.Autumn Dispersion Manager, we just want to add it to the portfolio, but we will have to decide the size of it.
Jeff Malec39:52
And what did you see by looking inside whether these boys get monthly reports or talking to them, about similar, where are we spread in terms, has become very long, isn't it?, but the index doesn't really move.So yes, what is your thought about what you hear from these guys
Gary Selz40:17
At the moment I am that it is still a difficult market.You have followed one of these medicines, such as Ozempic and Diabetes, Drugs for Weight Loss, this is that when shares move a lot, some options will be.P, and you look at the rest of the names, you know that all other names can be more correlated, such as a Russell 2000 index ... So just different to look in different ways to shop, can give some options.So I would say that the opportunity set is better than six months ago or a year ago.Be good on a flash and you don't know how long it will stay well.So that's how I say people when you are a relative value -if you are always in it.I say I think something will come to the horizon.
Jeff Malec41:38
However?You can say that the ball from Nvidia is cheap or expensive.
Gary Selz41:44
Yes, yes, Nvidia, and then it can die, yes.Where would go full versus, you know you said that Vix is low.Many options are also low..Thing, you know, in January some people thought you could say, okay, full of very little up.A point or two, but I think I have a lot upside down where it can have been created more generative.Think you know that there will be a market correction.But full came from a high place, so although you thought you bought full, you were not rewarded.
Jeff Malec43:15
We talked about this during the day.
Gary Selz43:25
It's great for a full -seller, right?It is a major financial crisis.So if you have bought full, and although the banks are moving, you were not rewarded that much.is full in a kind of low, low place.
Jeff Malec43:57
I once went to a speech that the audience is if you had a time machine, you went back to the start of the technical bubble., the statistics showed that the sale of Putten was actually good.Much of everyone looks, buy from money sets, but the sale of the monthly sets was actually the highest return in this period because the ball became so high,
Gary Selz44:26
Yes, what an interest in me..If you sell SAP, you will fall, when it is high or target at 100, these companies are really affected as a few of the companies you know, no, no, but they act with a higher bond.
Jeff Malec45:05
Much of the structural such as a company that sells the entire curve with shares and that is, yes,
Gary Selz45:11
Yes, structurally.
Jeff Malec45:31
Talk a bit about the difference, isn't it?Many of the bellies that come here, S, P Futures, SPX settings, Vix -Futures, VIX settings, such as, basically all in only the Index bus.Ball with a name as, do you see a name so important to be part of the Vault Toolbox?
Gary Selz45:55
Yes, I certainly do that.Part of the reason is that if you just treat a few indices if you are wrong, it is difficult to come back to a few stock options, you can have a very wide portfolio and have a few know that you have a whole book thatworks for you.
Jeff Malec46:17
But it will also be too big, right?If you make a classic, just if you had to trade all 500 names on the versus index, it can be expensive.
Gary Selz46:26
Yes Yes.So many people don't have that.Many opportunities.You can grow up in Nvidia.Why many people weigh on these products is that they can create a larger hedge fund with these products with less work.If you want to build a large hedge fund
Jeff Malec47:14
And talking through it is the reason why these props do not become $ 800 billion colosses.
Gary Selz47:22
They can only use a certain amount of capital in options for one shares,
Jeff Malec47:28
What is it like, what does it look like when the mortgage edge looks like?There are 15 names, 50 names,
Gary Selz47:32
Oh, in a few shares or companies,
Jeff Malec47:36
No in one stock, names that have done six or someone says that chronically can get their size
Gary Selz47:45
Maybe 50 names or 100 is more now that I think you could get a little bigger.Now you have to be more advanced to go in and out than before.More names, but there are also many names where there is a lot of lead, they are not that is traded thinner.
Jeff Malec48:16
Uh, yes.I remember a story about a man they had.Don't put my quotes in there.
Gary Selz48:38
Yes.Your short full and the stock is actually moving, or is it just a brand, or do you do on the actual part?
Jeff Malec49:01
I love it.What else did we cover?
Gary Selz49:10
Yes, you know we have a simple site, zero delta funds.com, we are an open book.In our company is our approach to finding leaders, the groups under the radar, the groups I think they are some of these traders, are as talented ice companies as millennium and citades and valley as the things of the world they want, but they just have the mindset that they will put together their money, family and friends and run their own small company, and it is the enthusiasts that we find the best talent.Exactly on the form there and
Jeff Malec50:04
So the name, but you are not actually doing all the time.
Gary Selz50:09
We try to be yes.I would say that the leaders have some flexibility in how they discover their deltas.Do you know what the Delta is happening for this?Call it.Zero Delta, yes.But also our portfolio, we are not trying to have a management risk in our portfolio.
Jeff Malec50:47
It is a very chicago business life, just like, what are the opportunities that do not count for the clip?'Rains or like, isn't it?
Gary Selz51:04
Chicago, Chicago Language, Bestemt Chicago Trader -Sprog.
Jeff Malec51:11
And last part we have not touched anything, they try to be zero delta, but you also try to be a positive curve or long convexity at the end of the day, right?
Gary Selz51:20
This is definitely what we are trying to do.We follow the Pareto principle.I think 80% of the money is earned 20% of the time.To be in the game.Because a good example was that I went back to earlier Softbank.participation,
Jeff Malec52:22
Yes, what is perfect, right?And if it is, if you can wear flat, ISH, anyway, a bit positive and then have these pops, it is ideal, yes,
Gary Selz52:33
We try to be in one stock -gene capital settings.There are options in different time.So we try to let you know what you know, the top one number, make double digits, return, but then really have high returns when you are in a quick risk of events, you know, the Covid, Big Financial Crisis.Com, Bubble and Bust, even, even as August 2015, when China devalued or tapered in 2018 or Volmageddon.
Jeff Malec53:13
Do you think this is completely from this field, not what you do, but not?
Gary Selz53:22
No idea that I accept, yes, no idea.And I think this is the best part of the ball trade, it is usually from the left field, right,
Jeff Malec53:33
Otherwise it is already priced. Like, yes, no, yes.
Gary Selz53:39
Always outside the left field, you know, as India moved 8% in a day last week.Yes, euro
Jeff Malec53:44
Shares fell by 3%, so yes, political things happen there.
Gary Selz53:48
Yes, there is one that are many political things in the world.I don't know if it will be a war.
Jeff Malec53:58
A huge home depot, or someone comes out and says, just as we retreat to our AI consumption.We don't think it's so good.
Gary Selz54:09
It can be a great catalyst.One in Enlille Channel.
Jeff Malec54:44
I like it.And again, that's not what of us.So it doesn't matter what we think, but it is fun to speculate,
Gary Selz54:51
However?But you still have to go behind your mind, always pay attention to these things and place your portfolio for what you don't know, and it also acknowledges that you don't know that you are alto.They are the best dealers, who knows.Did not know they don't have OS.And try to fight the market.Thesis, you have risk rones, it is the name of the game and the protection of capital.
Jeff Malec55:26
I love it.Can't say it better.
Gary Selz55:35
Yes, we had no rain for six months and now it all comes in a week.Yes, yes 10 Delta.10 Delta, I will come back to the airport tonight, but there you go.
Jeff Malec55:44
Okay. Thank you very much.We talk to you.And then have something for you, peace.
This transcription was automatically collected via otter.ai and as such can contain typo and errors that artificial intelligence has not correctly collected correctly.
