August 3, 2023
Welcome to the AD Derivatives podcast led by Director of Derivatives; Greg Magadini. Featuring: Gordon Grant, MD of Sales & Trading at Genesis Trading
In the podcast, Gordon Grant, the managing director of sales and trading at Genesis Trading, discusses various financial and technical details related to trading, volatility, and risk management.
Genesis launched the first OTC bitcoin trading desk in 2013. Since then, has grown to facilitate hundreds of billions in annual transactions.
Before joining Genesis Trading, Gordon was the director of derivatives at NWI, spending a little over 8-years there. Gordon has vast experience trading volatility in various asset classes and macro environments.
Today we talk about his background, option pricing nuances, and the current crypto volatility landscape. Here are some key points from the discussion:
Gordon's Background:
Gordon starts by providing insights into his background, including his degree in econometrics and quantitative finance and his extensive experience in portfolio management at a large multi-strategy hedge fund. He highlights that he started trading in 2005 and gained nearly a decade of experience in trading various assets like commodities, foreign exchange, fixed income, credit vol, equity index vol, and more.
Interest Rate Volatility in Crypto Options:
Gordon delves into interest rate volatility, mentioning that it was one of the later products he got into. He explains that interest rate vol is quoted in basis points (BP Vol) to ensure homogeneity across all tenors, as price volatility on different tenors is not comparable. He discusses the distributional elements associated with interest rate vol and the impact of zero interest rate policies on skew and convexity in the market.
Correlation-Based Strategies:
The conversation shifts towards correlation-based strategies. He discusses how correlation plays a significant role in volatility pricing, particularly in forex trading. He emphasizes the importance of understanding correlation dynamics, especially during extreme market conditions like the global financial crisis or the COVID reflation trade.
Systematic Volatility Strategies:
The discussion touches on systematic volatility strategies that involve harvesting volatility risk premium and exploiting mean reversion tendencies. Gordon shares how these strategies worked after the global financial crisis when traders could capitalize on high volatility in yen pairs by selling out-of-the-money convexity.
Principle Sell-Side Dealing Desk:
Gordon explains that Genesis Trading is a principle sell-side dealing desk, which means they utilize proprietary capital to facilitate client trades and manage risk. They have a systematic approach to ingesting client flow and dynamically hedge it to provide fair and reasonable pricing to their clients.
Market Making and Risk Management in Crypto Options:
Gordon highlights the difference between principle trading and proprietary trading. Genesis Trading focuses on market making, helping institutional clients put on significant option positions while managing their risk exposure in the market.
Risk-Adjusted Rate of Return:
Gordon mentions that Genesis Trading considers a risk-adjusted rate of return while pricing client positions and recycling risk in the market over time. They aim to achieve a reasonable edge capture while facilitating large institutional transactions.
Overall, the podcast delves into various financial and technical aspects of trading, volatility, and risk management. Gordon's expertise and experience in the industry provide valuable insights into the complexities of the financial markets and the strategies employed to navigate them.
You can view instruments, risk management tools, and crypto options activity on the Amberdata Derivatives App.
To learn more about Genesis Trading, click here.
