Options to Trend Following, and Back Again with Scot Billington of Covenant Cap.

The Derivative

We jump back into some VIX and Volatility discussion with this week’s episode but also get to talk about trend following’s rise and fall (and rise again?) over the past decade. We’ve got Scot Billington, the co-founder and managing partner of Covenant Capital Mgmt., talking through his unique journey from futures broker to floor trader of OEX options, to trend following hedge fund manager, to VIX trader and volatility focused funds. We talk with Scot about his indoor, Kentucky basketball themed half court basketball gym above his garage in the Chicago suburbs, what it was like being a floor trader back in the hay day of the CBOE options pits, having a side gig when trying to start a hedge fund, when customers cry uncle in a drawdown, turning the switch from trend to vol, why the VIX is different than options, how one can be both long vol and short vol at the same time, why Goldman Sachs doesn’t care about your VIX trading, why the short vol blowups annoy him, and why it isn’t all that crazy to look at adding short vol to the mix. Enjoy!

Chapters:

00:00-02:35=Intro

02:36-26:12 =JC Bradford, Options Sheets & the Trading Floor

26:13-44:16 = Trend Following Was GREAT, then it became Commoditized

44:17-01:08:47 = Turning the switch from Trend Following to VIX

01:08:48-01:24:35 =Selling Premium Retail, Buying Reinsurance Wholesale

01:24:36-01:30:03 =Favorites

From the episode:

LJM – THE AUTOPSY

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