We’ve said on this blog before that options are like playing 3D chess. Well then what does creating synthetic options via convertible bonds, equity positions, and bank debt play like??
Take a listen to this pod where we venture out of the futures/options space into credit, convertible bond, risk arb. Therefore, if you think you know how those hedge funds work… then you chat with someone like this who’s playing 4D chess while you’re playing checkers.
It’s @UrbanKaoboy on this episode, who’s ridden everything from ponies to draft horses to mustangs over his 30+ years in the investment game. Further, he was involved with commodities and derivatives at Goldman in the 90s, risk arb at Canyon Partners, and then opportunistic/value at his own fund Akanthos Cap Mgmt. Lastly, he decided to hang up his spurs and focus on running his own family office.
We’re talking with Michael Kao about
the credit culture in LA investment firms
trading the Goldman roll in commodities
how corporate debt = short puts and equity = long calls
the trading pits
finding long gamma in a short gamma arb strategy
convertible bonds
arb trade structures
Star Wars
pricing synthetic options
credit spreads blowing out
needing good marginability
Michael Saylor’s diamond hands
the potential train wreck that is MSTR’s balance sheet
and more.
This was a fascinating look into the mind of an opportunistic investor.
Find the full episode links for The Derivative below:
Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.
Benchmark 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.
Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.
Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.
Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.
RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.
See the full terms of use and risk disclaimer here.
