In this episode of Excess Returns, we’re joined by Noel Smith, co-founder and CIO of Convex Asset Management. Noel shares his unique journey from biochemistry and the military to market making, high-frequency trading, and running a volatility-focused hedge fund. We dig deep into volatility, regime models, income strategies, dispersion, tail hedging, and more, offering a rare look inside the world of professional options and volatility trading. Topics covered: Noel’s background: biochemistry, military, market making, HFT, hedge fund launch How markets have evolved since the 1990s Why volatility is the best source of market information Regime shift modeling and its role in strategy selection Using options for income and the trade-offs investors should understand Volatility harvesting and risk-defined short vol strategies The impact of zero DTE options on markets Dispersion trading and correlation dynamics Bond vol arbitrage and volatility surfaces Opportunistic trades like GameStop and meme stocks Tail hedging, its costs, and how to monetize hedges Lessons on flexibility, risk, and never being married to positions Timestamps: 00:00 Intro and Noel’s unique background 06:00 How markets have changed behind the scenes 07:00 Why volatility is the best information source 09:00 Regime shift model explained 19:00 Using options for income – benefits and risks 24:30 Volatility harvesting strategies 29:10 What the VIX does (and doesn’t) tell you 30:30 Zero DTE options and systemic risk 33:20 Dispersion trading explained 42:00 Bond vol arbitrage 45:00 Opportunistic trades: GameStop and beyond 51:30 Tail hedging and rebalancing 54:30 Lessons on flexibility and risk management
