The Meb Faber Show
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Chris Cole - Volatility Is The Instrument That Makes Us Face Truth | #134
In Episode 134, we welcome Chris Cole. Meb kicks off the show by asking Chris to describe his nontraditional background. Chris studied cinematography in film school at USC, while trading options in his spare time. He eventually made a career switch and began in Merrill Lynch’s analyst program in New York, while trading in his spare time. With his trading, he eventually created $1 Million to start his firm.
Key Points
- Chris Cole discusses the concept of volatility as the only true asset class, with investment strategies generally falling into either short volatility (short vol) or long volatility (long vol) categories, based on their response to market stability or change.
- Cole highlights the pervasive and systemic risk in the market due to the $2 trillion global short volatility trade, which includes both explicit and implicit short vol strategies, and the potential for a violent unwinding in the face of economic stress or interest rate changes.
- The episode explores the idea that passive investing, while popular, can lead to market instability and inefficiency, as the market becomes more flow-driven and less liquid, increasing the potential for severe market dislocations in times of stress.
Chapters
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| 37:27 | |
| 43:15 | |
| 53:25 | |
| 57:07 | |
| 1:00:17 |
Transcript
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