(Ep.99) The Acquirers Podcast: Jim Carroll – Vixology – VIX And The Volatility Complex, VIX, VIV, UVXY

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In this episode of The Acquirers Podcast Tobias chats with Jim Carroll. He’s the @vixologist on Twitter and Senior Vice President and Portfolio Manager at Toroso Advisors. During the interview Jim provided some great insights into:

  • The Volatility Complex
  • The Vol Tsunami Of 2020
  • From Value Investor To Vixologist
  • Volmageddon or The Volpocalypse
  • The Difficulty With Managing Institutional Vol ETFs
  • VIX Futures As A Form Of Insurance
  • Most Of The Time You Want To Be Short Volatility
  • Life Before Factors
  • Dual Momentum Strategy
  • Sometimes The Best Exposure Is No Exposure

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Full Transcript

Tobias: Hi, I’m Tobias Carlisle. This is The Acquirer’s Podcast. My special guest today is Jim Carroll. He’s the @vixologist on Twitter. He’s Senior Vice President and Portfolio Manager at Toroso. We’re going to talk all things, VIX, what’s happening in the market, what’s going to happen in the market, where Jim sees the VIX and the market right after this.
[intro]

Tobias: It’s great to chat with you, Jim. I particularly love chatting to vol guys, because I think that volatility and value go hand in hand because when the volatility guys are having a party, the value guys should be hard at work because the value guys’ party starts the next day. Let’s start with who you are, and then we’ll go on from there. Who are you?

Jim: Sure. Jim Carroll, currently a Senior Vice President and Portfolio Manager at Toroso Investments. Just a thumbnail sketch of Toroso. It’s a relatively new registered investment advisor, started six, seven, eight years ago by a guy named Mike Venuto, and three legs to our stool. It’s good. We have three legs so the stool doesn’t tip over. We have a more or less traditional wealth advisory business. High net worth individuals primarily, but also work with quite a few retirement plans. Advisors in different parts of the country. Venuto runs an investment management business that both is a series of separately managed accounts. We also recently brought on Michael Gayed, a name that people will know and his ATAC mutual fund and recently launched an ETF around one of his strategies.

Tobias: The Lead-Lag Report.

Jim: The Lead-Lag Report, yes, and is RORO, risk-on, risk-off, a great ticker. That business also supports an OCIO platform. We work with a lot of external advisors on portfolio management. We have the ETF think tank, steered by a guy named Dan Weiskopf.

Tobias: The ETF professor.

Jim: The ETF professor, indeed. An increasingly popular series of Zoom sessions around different topics. Then we have a business that really is a consulting arm around exchange-traded funds. Where we help people conceive launch market, exchange-traded funds. Recent examples would be our own RORO. We also helped a group out in California launch RPAR, a risk parity ETF last year, that’s become a very big business for us. Overall, it’s been a great ride the last couple of years actually are AUM, AUA, more than doubled in 2020. We’re over 4 billion now.

Tobias: Congrats.

Jim: Very, very rapid rise for the firm.

From Value Investor To Vixologist

Tobias: You’re a volatility guy, and you are the Vixologist on Twitter, which is a great handle by the way. How do you come to be vol guy?

Jim: Well, that’s a great question, because I didn’t start out as a vol guy. Actually started on Wall Street in the investment banking business. Corporate finance guy back in the 80s and 90s, became the CFO of a little internet company that went public in March of 2000-

Tobias: Oh, congrats.

Jim: -through Morgan Stanley.

[laughter]

Jim: Squeaked that one out the window and it just went thud. The good news is we didn’t get sued by anybody, but the bad news is it meant that there was going to be another chapter in my life. I was actually a value investor back in those days with my own portfolio. You will recall that value works like a charm in the aughts. When the internet was melting down, there were actually sectors of the economy that were chugging along nicely, real estate some of the commodity areas. For my own portfolio, I had discovered a handful of managers that I was basically building a portfolio around. People like Bill Nygren at Oakmark, Mason Hawkins at Longleaf Partners.

Tobias: Some great names there.

Jim: John Murray Aveyard at First Eagle, folks out at Dodge & Cox. Really, I was building my own portfolio and family around a group of value managers who successfully navigated the internet crash. During that time after my own little internet company was clearly not going to be the end game. I had some friends who were experiencing that meltdown, asked me, “Jim, what should I do with my money. I’m getting killed.”

There was enough critical mass there that I decided to start my own registered investment advisor, which originally was long-run capital in 2003. I’ll continue doing what I had been doing. The global financial crisis comes along and suddenly, I recognize that not only am I allocating assets to managers, I’m allocating risk management. As you know, Toby, value manager loves nothing more than for a stock to be cheaper tomorrow than it is today. [chuckles]

The portfolios were suffering along with everything else, in part because the other difference in the GFC was that everything was correlating. There were very few safe havens, in the back half of 2008, you could buy long term treasuries, and that worked. The dollar caught a bid, but other than that, it didn’t matter what sector or market cap strategy you were invested in, it was going down.

Life Before Factors

I had to think hard about how I was going to manage risk, and decided to undertake a research project to look at what was going on in the world that I just hadn’t experienced. I was a value guy, so there’s growth. What are all these quantitative people doing? We didn’t really have factors.

Dual Momentum Strategy

Nobody was really talking about factors in 2008-2009. If you did some digging into the body of research, there were some people talking about things like momentum. Tom Dorsey, Dorsey, Wright always called it Relative Strength. I manufactured my own momentum strategies in the fashion that now is best documented by Gary Antonacci with calling a Dual Momentum.

The idea that you are investing in the best performing whatever you want stocks, sectors, asset classes, with a hurdle, so that if they’re not jumping the hurdle, you’re going to move to cash. I look across asset classes, use different measures of momentum with a cash hurdle and create what I call an absolute return portfolio. Varied responsive to changes in markets, horribly tax-inefficient. I did actually come up with a methodology that moves a little more slowly, but is tax-efficient, and does tend to still ride the winners, and that is based on the Dorsey, Wright relative strength methodology.

This sounds so silly these days. All the way back in 2015, when the Shiller PE was already starting to look rich, bond yields had been plummeting for decades, Bogle and Arnott everybody were saying, “Gee, looking out 10 years, we’re not sure where the returns are going to come from.” I tripped over this stuff going on in volatility, with the VIX and betting on the VIX. Wall Street had invented these great new things like VXX, you could be long VIX. XIV, you could be short VIX. Okay, let’s do another deep dive. Who cares about weekends and nights?

Most Of The Time You Want To Be Short Volatility

Let’s start reading research on volatility and term structure and contango and backwardation. The internet’s a great resource. There were people out there saying, “Okay, here’s how these things are constructed, here’s how you might use them, here’s some systematic approaches.” Did a deep dive into that and came up with an approach to use these things to express either a short opinion or a long opinion. Most of the time, you want to be short volatility. That’s why I’d say to people, “What do you have in your portfolio?” I got S&P 500. I got these stocks,” da, da, da. “How would you say that expresses a view on volatility?” “Well, it doesn’t.

I just own a bunch of stuff.” “Yeah, you’re short volatility.” “What do you mean?” “If the stuff hits the fan, and your stuff goes down, it gets pretty exciting, doesn’t it? Yeah, that’s because you’re short volatility. What do you do about that?” Oh, by the way, we still haven’t really figured out what to do about that. The industry is still trying to figure out how to put the pieces together to offer a hedge product, a long volatility product, a long-short volatility product. I’m in the mix, as the vixologist trying to create that cocktail.

Tobias: What’s your approach to volatility? I have a friend, who we both know Chris Cole. Chris’s, I think he would characterize himself probably mostly as a long volatility guy. Then he’s trying to arbitrage the term structure, so when he sees some things that are out of shape, he’ll put trades on with the objective of reducing the cost of being long volatility, but what he’s ultimately trying to do is hedge a portfolio that you would characterize as being short volatility. That’s anybody who’s long a risk asset, like a value investor, or anybody as long equities is really short volatility. What’s your approach to volatility?

Jim: Well, it’s funny, somebody recently asked me or remark that, “Gee, you started your own registered investment advisor in 2003. Man, that took a lot of guts.” My response was, “I didn’t know any better so I did it.” When I looked at the volatility space, what intrigued me was the idea that you could play both sides of it, you don’t have to be dogmatic, either short, or long.

Short volatility through VIX futures, through volatility instruments, could be viewed as an equity substitute. Depending on how you’re doing it, it may give you a 2X or a 3X of the beta of the S&P 500, if you want to look at it that way. Certainly, the sex appeal is figuring out how to use a long volatility exposure to hedge your core portfolio. I think that’s where people have tended to focus. My view was, “Gee, I think I want to try and it’s really hard to structure something that can play both sides.” I don’t want to be dogmatic one direction or the other.

I honestly believe that it’s possible to where– Chris and others who are trying to offer a long volatility product that fits into somebody’s portfolio, checks the box that somebody has created, managing that bleed is critical. I look at it the other way and say, under normal market circumstances, that VIX term structure is rolling down, and if you’re short those VIX futures, you’re just collecting premium, recognizing that you can get kicked in the face on any given day. If I can do that, and figure out some way to avoid the real hard drawdowns, or ideally flip from short to long, then you’ve really got something. That’s the Holy Grail. I’m not there yet, but that’s the objective.

VIX Futures As A Form Of Insurance

Tobias: You’re agnostic, and you think about it like an equity substitute. So for people who aren’t in volatility all the time, it can be a little bit confusing, but you’re basically just the reverse of the market. When you’re long volatility, you’re essentially short the market, when you’re short volatility, you basically long the market.

The reason that the vol guys who are long vol guys like Chris are attracted to it, is because it tends to have this explosive move. If the market goes down, volatility spikes very, very materially. That’s why Taleb wrote the book, and he describes that– he characterized as someone who is short volatility, that the return pattern that they see is quite consistently– quite consistent regular returns, until the day that they’re like the turkey on Thanksgiving, who gets their head chopped off. How do you manage that kind of risk, what signals that you’re looking for?

Jim: I look at different measures of the term structure. If you think about what the term structure looked like in March–

Tobias: What’s the term structure? We should just define that term?

Jim: Yeah, certainly. You have VIX futures contracts that go out. I think we now go out 9 or 10 months. Right now, the front-month VIX futures contract which is going to expire next week is the January future. So, then you have a February, March, April, May on out. In normal circumstances, if you think about VIX futures as a form of insurance, you would expect the longer that insurance covers the more you’re going to pay for it. The out month VIX futures contracts typically are going to be more expensive than the near month VIX futures contracts. There’s typically a premium between spot VIX and the VIX futures.

Tobias: You can’t actually trade VIX, that’s a calculation based on some options.

Jim: Correct.

Tobias: The only things that you can trade are the futures or options on the futures or one of these products that has those things embedded in it the ETFs that hold them.

Jim: That’s correct. Any option contract, so you could also be trading SPX options as a play on volatility. You could be expressing a view that you think the options are too cheap. You think that they don’t express enough volatility, and you could buy them, you could say that they’re expressing too much volatility and you could sell them. There are a bunch of different ways that you can express a view on volatility.

The typical, where I’m focusing my attention is the VIX futures term structure 80% of the time, that is in contango, it rises in price over time. You get into situations like the end of 2008, or where we were in March of last year. Hard to call it last year already, but March of 2020. The front end, people freak out. Everybody wants to buy insurance after the hurricanes hit.

Tobias: [chuckles] I need that insurance right now.

[laughter]

Jim: “The house is on fire. Can I please get some insurance?” You’re going to pay for it. The front months spike higher, the back months will tend to rise as well, but instead of the curve being lower left upper right, it will go from upper right to lower left. If you can get in the way of a move like that. In February and March, we went from a VIX of below 20 to a record close over 80 in 19 days, unprecedented.

We also recovered faster than anybody anticipated. If you go back to 2008, we didn’t see VIX go back below 30 until the middle of 2009. I think it was 141 trading days, it was some crazy number. The VIX futures are the toolset available for people to use as the most direct way to express a view on volatility.

Volmageddon or The Volpocalypse

Tobias: Have you seen any changes to the behavior of VIX or the term structure over the period of time that you’ve been following it? I raised it, because that’s one of the things that I’ve heard Chris talk about quite regularly, where he says that the spikes are more regularly sold. The volatility seems to drain away faster and faster all the time. You give that 2008 example where it was elevated for a very long time.

Then it seemed to be very sensitive to even 2012, as far out as that it was still popping. Anytime there was any kind of market event, it was quite sensitive to it. Then it went through this very long period of time of being crushed, quite low. I think even until last late 2019, it was still very, very low. People wondering whether it would ever– will this ever get back to like a 20? Because it was trading in the low like 10, or 11, 12 kind of number.

Jim: There’s the old saying, “No good deed goes unpunished.” I think the Wall Street equivalent is, “There’s no good idea that doesn’t get overused.” One of the things that clearly has changed over time is that the volatility ecosystem has expanded and expanded in terms of use cases, instruments, and larger players using it to express a view or using it to hedge a portfolio or using it to augment returns.

Clearly, one of the things that Chris saw and documented was the institutional evolution in the use of volatility as a way to not only hedge but to scrape some so-called risk premium out of the market. We’re going to sell volatility premium, most of the time we’re going to just be able to collect it and move on and do it again and do it again and do it again. As you suggested, that’s all well and good until– I’m reminded of the Roadrunner cartoons where the coyote finds himself off the edge of the cliff. [laughs] And then it’s straight down.

If we go back to February 2018 as an example of, what we call Volmageddon or the Volpocalypse, where it seemingly all of the sudden VIX doubled and people were crushed. One of my favorite exchange traded products disappeared, XIV.

Tobias: After the close.

Jim: Yeah. I will never forget watching it in real-time and chatting with colleagues about what was going on. Then hearing some stories in the aftermath about people who were buying it after the close. [laughs]

Tobias: Well, I saw people buying it on Twitter, people talking about buying it on Twitter, because that because it was down 94% or something off to the close and then not knowing it was going to be ultimately a zero.

Jim: Yeah. I think there have been a number of changes over the years. It has matured– the VIX futures have matured as a product, options on the futures have matured on the product. These instruments have generated demand and volume for the underlying over time. Institutions have gotten involved, for better or for worse. There’s a debate ongoing right now about, are they all back in the game after March?

Clearly, there were some hedge fund blowups in the vol space, people who were doing things that they probably shouldn’t have been doing, including some significant pension funds. That’s the nature of the beast, if you can get away with it, make a bunch of money, and you think you have the risk cordoned off, somebody’s going to do it. Somebody may be doing it, even if they don’t necessarily have the risk cordoned off. We see that from time to time, it’s the nature of the beast.

The Once in 1000-Year Volatility Storm

Tobias: Well, Taleb talks about it. Where he says that it’s one of those trades that you can be short volatility for years and years and years and get paid to be short volatility. Then the year where you blow up, you say, oh, well, that was the unforeseeable once in 1000-year storm that rolls around every seven years or so.

Jim: I’ve gone back to the best of my ability and looked at different little events that have taken place since all of this stuff started. The only one that really was terminal on its face was February of 2018. There’s some evidence to suggest that the analogy I use is that XIV was standing in the window, looking down and somebody pushed because there are certainly a lot of smart people out there who understand the specific mechanics of the rebalancing of these things on a daily basis and knew exactly what the guys managing XIV were going to need to do.

Maybe they helped. The only thing I could say about that is, in my analysis, my experience suggests that most of the time, maybe not– you never say never, never say ever, but most of the time, if you’re paying attention to the behavior of the term structure, to the behavior of different measures of volatility, you can get some hints.

There are a few little footprints in January of 2018, I think it was January 16th, to be precise there was just a little hiccup. Not necessarily enough for people to be paying attention. Certainly, if you had spent all of 2017 short volatility, you wanted that ride to just continue, because lots of people cashed a lot of money in 2017, myself included.

I lived in Hawaii for four years, and we were always paying attention to the volcanoes. Before they erupt, if you’re paying attention, they’re giving you some signals. There’s some steam rising, there’s some stuff moving around. If you’re standing on the edge of the crater, when the full eruption happens, you’re stupid. You probably deserve what you get. I can make an argument that people who were still short volatility on February 5th, 2018 just weren’t paying attention, because there were some things happening that were inconsistent with short vol being safe.

Tobias: Yeah, that’s interesting. It seems to me that it’s there was a similar event, I remember the manager, but I can’t remember the name of the product. I don’t want to mention the manager, but there was a very popular retail product. I think it was an ETF in about 2011, late 2011, early 2012 that it was getting so much flows, that in order for– and I think the market might have been a little bit thinner at that point.

Basically, they were pushing, the market was getting out of shape, their trading was impacting the underlying instruments. There are a lot of guys out there, and the reason I know about it is because Chris was trading the other side of it at the time and apparently was a reasonably well known, reasonably popular trade.

Eventually that product had to be wound up just because it got too big. Is that something that happens in this market? Or is it because it’s a thinly traded market? Is that something that doesn’t happen anymore? Or, is it just one of those things that it gets popular? Everybody gets to one side of the boat, same thing that happens in every single market.

The Difficulty Managing Institutional Vol ETFs 

Jim: I think that that clearly can happen. It happened with XIV. XIV assets ballooned to over $2 billion by February 2018. You had this sort of stereotypical cab driver. “Hey, have you heard of this stock? XIV? It just goes up.” I had no idea what it was, thought it was a stock, I thought it was a company.

Clearly, that was one where everybody was on that side of the boat. Another example from March of 2020 was the other side, TVIX. Credit Suisse sponsored product which was 2X long volatility. If you bought TVIX in the middle of February and held on to it, you made a boatload of money.

By the middle of March, the AUM for TVIX, I’m not going to get the number right, was $8 or $9 billion. That was exposure that Credit Suisse had because it was an exchange-traded note. Somebody at Credit Suisse said if this starts going the other direction, this could blow a hole in our ship, and we could go under.

They announced that they were going to delist, they didn’t actually redeem, which is one option they had, but Credit Suisse decided to delist TVIX. It is still out there. It does still trade. TVIXF, but it’s over the counter pink sheet kind of thing now, but that was another example where a combination of inflows and price appreciation ballooned this thing up to a size where the manager just said, “We’ve got exposure that we never imagined here.

This is not what we signed up for.” That can happen. The other aftermath of February 2018 was the two of the popular products, UVXY, which had been a 2X, and SVXY, which had been a minus 1X, like XIV, both had their leverage taken down. SVXY became a point five inverse. UVXY became a 1.5 long instead of too long.

There is some risk to the sponsors of these products in terms of managing their exposure, but they’re popular. When SVXY was neutered, we immediately saw increased activity in VXX, which is the 1X long, the most popular. A lot of that activity was people using the short side of VXX to express a short vol position.

Tobias: That was shorting the ETF rather than–

Jim: They were shorting the long ETF to get the full minus one exposure.

Tobias: Got it.

Jim: Instead of going long–

Tobias: A short ETF.

Jim: Exactly. Again, people are very ingenious. A lot of smart people out there who can do the math and figure out how to get the exposure they want. Quite a few hedge funds do play with these things. The more sophisticated investors will say, “Well, that’s crazy. You’re paying a management fee to get exposure for VIX futures. Why don’t you just go get the VIX futures directly?”

Well, because I don’t want to roll the VIX futures every day. I don’t want to manage the duration of that exposure actively the way you one might want to. I prefer to get the exposure and let a trading desk manage that exposure for me. I know what I’m getting. I’m willing to pay the expense ratio, because I think on a net basis, it’s going to do X or Y, and that fits my objectives.

The Vol Tsunami Of 2020

Tobias: Last year was an interesting year in volatility, which is not always true. Not every year is an interesting year in volatility. Last year was particularly interesting because we had the gigantic crash at the start, which is the most rapid crash, more rapid than 1929 volatility had that unprecedented spike. Then it was a lumpy term structure because of the election. Early in the year, there was a lot of fear around the election, so people will long volatility. Can you walk us through what happened last year? What was unusual about it beyond that?

Jim: [laughs] Well, yes, as you said– what was interesting was, we started off the year, fairly benign, equities churning higher, volatility relatively low, down in the teens. People, essentially, not appreciating the potential of this COVID thing, until the very end of February.

Then it was just like, somebody opened the trapdoor, and the whole market fell through. The market with VIX in the teens was clearly not pricing the what happened. I mean, who would? It was one of those tsunami kind of events, where you wake up one morning, and maybe you turn on the TV or somebody sends you a text. “Do you know that there’s 100-foot wave headed toward your beach, Toby?” [chuckles]

You might want to get out of the way. Well, how quickly can you get out of the way? Clearly, this was a circumstance where people were not prepared to get out of the way of the pandemic. It slammed hard, limit down day after limit down day. VIX crept up steadily to a brand-new closing record in the 80s.

The relief package, the Fed actions, it was reminiscent of the end of 2018 when we had the little fear that the Fed was going to tighten and the markets sold off hard, and then they came out and said, “No, we’re just kidding.” The market turned right around and started marching higher again. This was very reminiscent of that episode. Hardcore sell-off, and then March 23, the market bottoms and turns around and obviously there were hiccups along the way, but generally, just started marching back to all-time highs.

People scratching their heads saying, “There’s no way. How can we go back to all-time highs?” That’s expressing itself in the volatility space because as we have notched all-time highs, I’m looking at the market today, we’re not quite there on the S&P, but the Russell’s caught up, a lot of single stocks have just blown through their previous all-time highs. Yet, VIX and the VIX futures are sticky in the low to mid-20s. We’ve been above 20 since February 24th.

I’ve lost track of the day count, I’ve got it someplace, but it’s the second-longest stretch of VIX north of 20. The prior one being in the 2008-2009 timeframe. Somebody out there is still a little nervous. There’s still a bid for insurance in the volatility realm.

The Volatility Complex

Tobias: I saw a chart yesterday that showed that I think it was an inverse VIX with the S&P 500. Basically, what that means is that, basically they track each other reasonably closely, but it had started diverged, which you might be able to interpret that. But the way that I interpreted it was just that there’s a lot more fear out there than perhaps the all-time highs. We’ve seen many all-time highs late last year. We may not have seen one yet this year, but we’re close, very close to all-time highs. What does it typically mean for the market?

Jim: Well, what it’s suggesting is that not everybody’s buying into the all-time highs in the equity indices. It would be, again, that inverse correlation between the S&P 500 and the VIX tends to be quite high. With the S&P making new highs, kind of grinding higher, but VIX, not making new lows, which is what you would expect if that correlation is holding. Does that mean that the equity market is going to turn around and go down?

What it means to me is, pay attention. There’s a divergence, there are lots of you can get the technicians on, you can look at divergences and a whole bunch of different indicators, new highs, new lows, market breadth, percent over 200-day moving average. If you want to find a divergence, there’s one out there. [chuckles] It doesn’t necessarily mean that the market is going to turn around and go lower. What it means to me as somebody who pays attention to the volatility complex is, okay, pay attention, because there’s a bid for the SPX options that make up the VIX calculation. Somebody is buying enough of those things to keep the VIX in the low to mid-20s where you might expect that by now, it would have gone back below 20.

Sometimes The Best Exposure Is No Exposure

Tobias: You’re a little bit in front of me, that’s where I was going to go next because I’m aware that there’s a lot of Robinhood options speculation in the market. I’ve had the in-laws back Christmas and New Year’s and had an opportunity to discuss with people who aren’t markets people, but who are now in Robinhood, punting options, because you can get all the leverage. They need those high returns. Does that impact? Does it change the signal that you get from those things?

Jim: I wish I could say that I have completely figured that out. I certainly haven’t. I do pay attention to– and try to talk reasonably regularly with people who are more sophisticated in the options landscape than I am, and in the flows. Jim Carson is a rising star on Twitter because of his regular observations on what’s going on with flows, and derivative activity. Benn Eifert, who you know. There are a number of people who are closer to what’s going on in that world than I can be. I try to see what I see and then look to see how other people might be interpreting the same information.

I have my own little dashboard of indicators signals. Sometimes they are just all green, there’s just no question which side of the trade you should be on. Sometimes they’re all red, there’s no question which side of the trade you should be on and whole bunch of the time with a mixed bag of red, green, and yellow, and you’re just like, “Okay.” The probabilities are not as strong as you might like them to be. Oh, by the way, sometimes that means I’ve got no exposure. I’ve got no trade because I’m not sure what’s going on. To me, that can be an appropriate place to be.

Tobias: When I was first learning about volatility with Chris, he pointed out that the late 1990s had a similar behavior when the market got very bullish when there was a lot of speculation, VIX started running up along with the market, which was unusual behavior because usually when the markets going up, volatility is pretty compressed and vice versa. That started something that I noticed happening again in late last year, mid to late last year that volatility has– the speculation is upside speculation is creating upside volatility in the market. Has that behavior continued on? Is that something that you’re seeing?

Jim: Well, I think people forget that VIX as a measure of volatility doesn’t care whether the volatility is on the upside or the downside. If the S&P is moving 3% a day up, that’s volatility. That will probably be expressed in the level of the VIX. When the markets moving up, it tends to be moving up in small increments and fairly steadily. Therefore, volatility tends to be relatively low.

A market that’s of rumbling higher with a lot of activity and perhaps an increase in specular activity can certainly justify a higher level of VIX. Sometimes you have to recognize that the markets going up, and VIX is steady or going higher in part just because it’s reflecting the fact that the markets moving higher in steps that are bigger than they are typically.

Tobias: Jim, fascinating conversation. We’re coming up on time, if folks want to get in contact with you or follow along with what you’re doing, how do they go about doing that?

Jim: Well, the easiest way is to follow me on Twitter, @vixologist. I tend to be responsive to direct messages if people want to jump in there and ask me a question. I had somebody suggest that I was cagey sometimes on Twitter. I said, “Well, I’m an investment advisor, I can’t give advice.” I’ve tried to make that clarity a number of times. If some of my Twitter commentary is cagey, it’s because I do have compliance people keeping an eye on what I’m doing and I want to stay on the right side of the law.

Tobias: We’ll throw that up in the show notes, Vixologist. Sorry, Jim, I cut you off there.

Jim: No, that’s quite all right. I’m on LinkedIn for what that’s worth. Happy to connect with people there. Twitter tends to be the center, the eye of the storm for FinTwit and VolTwit and all things happening in the space these days.

Tobias: That’s great. Jim Carroll, Vixologist at Toroso. Thank you very much.

Jim: Thank you, Toby. Great to be with you.

Tobias: My pleasure.

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