John Sindreu
speaker
195 appearances
4 recordings
1 series
first heard Feb 2018
last heard Mar 2019
John Sindreu’s voice in public audio — every appearance, attributed to the second.
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Appearances
But
what ends up happening is that if you act like an insurer, you'd better be ready for it.
And ready means that, well, there comes a day where there is an actual hurricane or a tornado, and then you've got to pay out and you need to be able to do it.
And this is where a lot of these products and a lot of the investors investing in them get a bit complacent.
And they might find that they don't have the liquidity to pay, and then they have to offset those bets
somewhere else and they end up hurting the broader market.
Yes.
So, you know, let's say that you are selling volatility means that you are sort of betting that the swings in the stock market will be very muted.
And suddenly you find that, oh, that's a losing bet.
What do you do if you're sort of in the jargon shorting the VIX?
Well, you try and buy the VIX.
And that means that you are sort of betting on more volatility to try and offset the losing bet you made previously.
And
The thing with that is that there's something that is unlike tornado insurance, which is that in financial markets, the actual insurance can make tornadoes appear or disappear because the different markets are connected underneath.
And as I say, when you get hit in one market, you try and buy and sell in the other.
So what actually ends up happening is that when a lot of people bet on this VIX going up,
they end up making the stock market going up and vice versa.
Yes.
Before we were explaining how sometimes, you know, people that are actually selling a lot of tornado insurance can make tornadoes disappear for a while.
And why is that is a big question.
Showing 161–180 of 195 · page 9 of 10
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