Is Managing Volatility Really An Asset Class?

Benzinga

Richard L. Selvala, Jr., Harvest Volatility Management, LLC  #1 Morning Stock Show To Get You Ready For The Stock Market Open, PreMarket Gainers, Earnings This Week, Economic Data & More!  Benzinga PreMarket Prep 8:00AM ET- 9:00AM ET BenzingaTV on YouTube

Transcript

00:00 Hey, Rick, how you doing?

00:02 Good morning, Joel.

00:03 Doing great.

00:04 Good, good.

00:05 So just a little background.

00:07 He is the founder and CEO of Harvest Volatility Management.

00:11 So I just want to talk about volatility in a broad sense here, because you talk about

00:16 asset classes, right?

00:18 And Bitcoin burst onto the front.

00:21 Many are considering that a new asset class.

00:24 Where do you put volatility and managing volatility?

00:27 Is it truly an asset class?

00:29 Yeah, people make that argument and I can make the argument.

00:34 You can certainly have a strategy where your returns are based on managing volatility,

00:42 changes in volatility, views on volatility.

00:45 And so you certainly have hedge funds that are volatility based.

00:49 You can look at things like the VIX, which is negatively correlated to the S&P, which

00:56 makes it interesting to many.

00:58 And there are other advantages of volatility.

01:01 And really what we trade is more options.

01:04 And so we trade options on the S&P 500.

01:08 And so volatility is a big part of what we do, but we don't trade volatility as an asset

01:13 class per se.

01:14 We use options to try to reshape the return distribution.

01:19 So if we can cut off the left tail of returns or if we can add some incremental yield in

01:28 a hedged fashion.

01:29 So we really use options to help reshape and try to improve the return stream of a client's

01:35 portfolio rather than really trading volatility as an asset class.

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