Educating investors about volatility investing has been a theme of the Chicago Board Options Exchange’s Risk Management Conference Europe, at the Penha Longa Resort in Sintra, Portugal. One of the managers in that mode is SigmaSquare Capital, which is headed by cio Stefan Wintner in Zurich. “It’s about educating people about volatility as an asset class. I’m speaking with different seed funds and also institutional investors,” he told DW on the sidelines this morning.
Wintner , who worked at high-frequency trading shop IMC, is aiming to launch a fund focused only on volatility trading, after trading the strategy since Feb. 1, 2002. The fully systematic strategy tries to arb out the term structure of the volatility curve, mostly via VIX trades but also VSTOXX. There are no OTC trades. “In the long run you want to earn the volatility premium. In the short run—and this is the crucial part—you have to avoid the volatility spikes that can cost and create very negative payoff profiles, meaning you can make small gains every day and every now and then you make a big loss,” he said.
The fund will launch in the first or second quarter next year, via a Luxembourg-based UCITS manager to which SigmaSquare will act as a consultant. Wintner expects returns of around 15% per year with volatility of around 10%.
