In this discussion, the ReSolve team is joined by David Sun, a retail investor

turned hedge fund manager with a background in engineering. David shares his

journey from options trading during grad school to launching two private

options-based hedge funds. He discusses the intricacies of options trading, the

importance of risk management, and the evolution of his investment strategies.

Topics Discussed

•David Sun's background in engineering and his transition into options trading

and hedge fund management

•The launch of David's two private options-based hedge funds and the rationale

behind having two separate funds

•The importance of risk management in options trading and how David's strategies

have evolved to minimize volatility drag

•The concept of return stacking portfolios and how it has been applied in

David's funds

•The role of diversification in enhancing portfolio performance and reducing

risk

•The potential of long volatility strategies as a diversifier and how they can

be applied in retail investing

•The impact of market changes on strategy backtesting and the importance of

continuously updating strategies to reflect current market conditions

•David's views on the future of his funds and the potential for launching a

third fund

•David's public presence and his efforts to educate retail investors through his

podcast, The Trade Busters

David Sun provides a unique perspective on options trading and hedge fund management,

drawing from his background in engineering and his experiences as a retail

investor. His insights into risk management, portfolio diversification, and

strategy development offer valuable lessons for anyone interested in the

intricacies of options trading and hedge fund management. This episode is a

must-listen for those looking to deepen their understanding of these complex

financial landscapes.

This is “ReSolve Riffs” – published on Friday afternoons to debate the most relevant investment topics of the day, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management.

*ReSolve Global refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association ("NFA"). Further, ReSolve Global is a registered person with the Cayman Islands Monetary Authority.

If we see call premiums at a certain part of the surface

2

contracting at a certain rate, that will

be our signal that it's a downtrend.

3

And so when we deploy the

premium, we'll lean short, we'll

4

sell calls instead of puts.

5

Conversely, if put premiums are

expanding, that's another way to

6

indicate market's probably going down.

7

And yes, they're mirror images

of each other, but they're not

8

gonna react exactly the same.

9

So looking at call contraction and

looking at put expansion can give you

10

the same type of signal, but the timing

and flavor will be a little different.

11

Adam Butler: All right.

12

Welcome David Sun, David,

um, private fund manager.

13

I know you've been on Corey Hoffstein's

Flirting with Models podcast, and, uh,

14

that's how you showed up on our radar.

15

So welcome to Resolve Riffs.

16

David Sun: Hey Adam.

17

thank you.

18

And, uh, it's a really privilege

to be here and I wanted to first

19

mention, I don't know if you remember,

but, uh, you've actually been quite

20

an inspiration to our strategies,

how we approach the markets.

21

And it actually started with

your first episode on, Flirting

22

with Models, the Ultimate Gift

and a very aptly named episode.

23

It's honestly, that's been the, the

gift that I keeps on giving because the

24

kind of ideas that, you talked about,

especially towards the end with regards

25

to ensemble methodologies and just.

26

Not having to focus too much on one

particular, you know, way of doing

27

a strategy and just being able to

diversify and have a robust portfolio.

28

that, that's been kind of the

fundamental premise from which all

29

of our ideas, you know, move from.

30

And again, you may not remember, but I, I

sent you a DM on Twitter maybe a year and

31

a half, couple years ago, just letting you

know that I had really lashed onto that.

32

So again, uh, it's

really come full circle.

33

So like I'm

34

Adam Butler: Oh, that's brilliant.

35

Wow.

36

Yeah, no, thanks for letting me know that.

37

I think that's the one that

Cory and I recorded, in Banff.

38

I think we were both at a

conference in Alberta and, uh.

39

We sat at the bar and had a couple

of pints and, recorded that episode.

40

And, uh, I remember that one

was a, that was a lot of fun.

41

So I'm glad it had an impact.

42

David Sun: Yeah, definitely.

43

And I always share that cliff with a

lot of people who follow me on my own

44

own podcast, and so on and so forth.

45

So I think it's, uh, you've had

a, a lot of, uh, impact on, on me

46

and the people who listen to me.

47

Adam Butler: Oh, that's brilliant.

48

Well, that's great.

49

So, how have you translated some of

that into what you are currently doing?

50

Maybe, so what are you currently

doing, and then how did you

51

come to become a private

52

David Sun: Okay.

53

So I guess a little bit about my

background first, is that kind of Yeah.

54

So I started off as, um, my

background's in engineering, so

55

electrical engineering, and actually

I started off as a retail investor.

56

I don't have any formal

finance background pedigree.

57

Uh, I actually just got,

incidentally into options trading

58

during grad school at Princeton.

59

Right around 2008, 2009, there was a

friend there who, you know, that was a

60

time where the market was gonna be on your

mind regardless if you intended it or not.

61

And uh, I had a buddy there that traded

options, you know, really nothing too

62

sophisticated, but he got me into that.

63

So, interestingly enough, I started with

my foray into the markets by trading

64

options, but not only that, but from

selling options and selling premium,

65

which is usually kind of backwards 'cause

I think most retail get into it as way

66

of speculative leverage and having big

payouts and lotto, so on and so forth.

67

So I got my start with that.

68

Again, nothing really sophisticated.

69

I was just selling, you know, randomly

selling, put options on various

70

symbols, whatever it was, you know,

on mad money, whatever Jim Cramer said

71

that would come, come to my attention.

72

So again, nothing really

sophisticated, uh, was just

73

doing that for a number of years.

74

It was really around 20 17, 18 that I

found more, I don't know if it's books,

75

but it was like online communities,

online kind of options, education,

76

where I started to try and be a little

more systematic again with that kind of

77

engineering and math background and trying

to do something that's more repeatable.

78

And probably a couple years later,

and, and this was the time where I was

79

kind of accelerating my own learning

80

you know, things were going well and,

and I got the confidence to launch my

81

first, private options based hedge fund.

82

Nothing really big, no small shop.

83

Uh, that went well.

84

a couple years later, 2021

launched the second one.

85

We can talk about why two and the

differences, so on and so forth.

86

But, um, along the way I've,

I've always been kind of.

87

Still found myself associated with

toward the retail community because

88

that's kind of where I got my legs.

89

And I still collaborate and communicate

with a lot of people in the retail

90

community through online groups.

91

I have my own podcast, which is

sort of a focus on retail education,

92

but with a focus on options.

93

But lately has also grown

into not just like options and

94

strategies, but more about portfolio

building, ensemble methodologies.

95

I had people like Cory on the podcast.

96

I had Andrew Beer talking about

trend following and ETFs and how

97

to utilize that to build your book.

98

I think that's some topics

we may touch on as well.

99

so that's all kind of been going on

and that's been the last few years.

100

Uh, and that kind of catches you

up to where I am today, I guess.

101

Adam Butler: Yeah, that's great.

102

So why don't we get into

why the two different funds?

103

David Sun: So originally,

my first fund had.

104

Kind of a simple mandate.

105

And it was the idea of, and actually

it's funny, it was return stacking.

106

I know that's a term,

kinda a buzzword lately.

107

And it was a simple concept of if I

can take, you know, buy and hold the

108

market right, get my pure beta exposure,

well, options are an instrument which

109

you can trade a margin so you're, you

don't have to have cash in the account

110

If you have equities, those equities

are marginable and you can basically

111

overlay an option strategy on top of that.

112

So the idea was just to get a pure

beta exposure and trade varying

113

option strategies to generate,

you know, some marginal, couple

114

percent alpha for instance.

115

And if you can, consistently outperform

the market, 'cause you're stacking that

116

little bit of alpha on any given year,

you're not gonna beat it by very much.

117

But over time you let

that compound, right?

118

A 10% keger versus a 12% keger after

10 years, it's pretty meaningful.

119

So that was kind of the original idea.

120

And then throughout the, the few

years after that fund was launched,

121

we were always like investigating

and developing new strategies,

122

looking at different tenors.

123

You know, in the beginning was treating

a lot of weekly options out seven days,

124

we explored forty-five days, 90 days.

125

And we start going the other way,

going shorter duration, two to

126

three days overnight basically.

127

And of course now zero DTE is kind of the,

the buzzword in the last couple years.

128

So we, we did a lot of intra - basically

intraday, zero DTE options trading.

129

And the interesting about zero DTE is

the fact that it's intraday, right?

130

So there is no, there,

there's no overnight exposure.

131

You go flat, by the end of the day.

132

And so, there was, some demand

from existing investors and also

133

new prospects for a focus on

trading just zero DTE strategies.

134

So.

135

My now partner who then wasn't partner,

but my business partner who I launched

136

the second fund with, he basically,

he's sort of the, the tech guy.

137

so he built the, the backend automation

for us to scale up trading pure zero DTE.

138

And we spun that out and just made

a separate product, separate fund.

139

So it was, the focus was zero DTE.

140

And so that was the reason.

141

So you kind of get a

little different flavor.

142

with the zero DTE, no overnight

exposure, you can kind of keep the, the

143

volatility of your portfolio very low.

144

There's no equity holdings,

there's no holdings.

145

It's just we're in t-builds

basically overnight.

146

So that was kind of the reason and

fundamentally the difference in

147

why that second fund came about.

148

Adam Butler: So the Zero DTE, you know,

other than following the flows of the Zero

149

DTE phenomenon, you know, I haven't really

done much digging into exactly what kind

150

of strategies you employ at that tenor.

151

So is that something

you can go into at all?

152

Like just in general, what kind

of, or maybe just what kind of

153

strategies do people in general

deploy at that short timeframe?

154

David Sun: So I don't know

how you qualify in general.

155

'cause we're not a large, you know,

institution and I know now there's

156

institutional level ETFs and I, I guess

they're doing cover calls or whatever.

157

We're kind of, uh, put underwriting.

158

but what we're doing, and the funny

thing you asked about that is it's

159

actually the similar kind of strategies

that we've run at Higher Tenors.

160

It's just at zero DTE.

161

Not to be too reductive about

that, but the idea is you're just

162

trading a shorter duration, right?

163

So a simple strategy we might have

is just, you know, a naive one, and I

164

mentioned this on Corey's podcast, we're

just naively selling puts and calls.

165

When you say put and call and we spread

'em off, let's call it an iron condor.

166

But the idea is, I think sometimes

these kind of strategies get a bad

167

rap because people think you just sell

iron condors, leave it like it is,

168

and you're quote unquote, harvest the

VRP and you don't have to manage them.

169

Well, we know that that's not the

case because if, and especially

170

recently realized volatility has

been quite a bit above the implied,

171

so you can get easily blown out.

172

So we're gonna manage the risk, you know,

take the positions off, you know, stop

173

out at a certain percent loss or whatever.

174

But the main difference is when

you're trading zero DTE, you can get

175

a lot of occurrences because number

one, there's expirations every day.

176

So that gives you, you

know, 250 trading days.

177

But number two, you know, we can kind

of deploy positions throughout the day.

178

So we're t tranching into, and I

guess on the surface it almost just

179

looks like deploying iron condor,

re-centered every, . You know, let's

180

call it 30 minutes for instance.

181

And because the market's moving around

now, it's a little bit more than that.

182

But the idea is when you have so many

occurrences, you know, people that deal

183

with options and probabilities, you know,

there's a concept of law of large numbers.

184

And when you can trade this many

occurrences, you can really get that

185

law of large numbers to play out.

186

So if you can trade, you know, a

dozen times a day, then you multiply

187

by 2 52, how many samples is that?

188

And so it's really about being

able to trade very small positions

189

and having a lot of occurrences so

that you can kind of really control

190

the volatility in the drawdowns.

191

Adam Butler: Yeah, I mean it's um,

fundamental law of active management.

192

You've got an edge and you've got

breadth, and one of the ways that

193

you increase the breadth is by

trading more frequently, right?

194

So just having a much larger sample size

can really smooth out the return profile.

195

When you're observing it on a daily

timescale and you're, you know, you're

196

trading eight to 15 times a day, then

that adds up to a lot of extra breadth

197

Are.

198

David Sun: I think that's one of the

reason I was gonna say, I think that's

199

one of the reasons some of the, uh,

institutions got into, you know, 'cause

200

they used to do cover calls but now

they can trade on a much shorter basis.

201

And that also kind of gets rid of

some of the path dependency associated

202

with trading longer duration

203

options.

204

Adam Butler: Yeah, and

it's, it's nice there.

205

There are benefits to

not holding overnight.

206

There's some downside too,

but, but there's some benefits.

207

Are you just primarily

trading index options

208

David Sun: training, we, we are

training exclusively SPX and X options.

209

Um, I, I think they've introduced, I think

QQQ just came out with zero DTE and of

210

course technically any option has zero

DTE, but just on the day of expiration,

211

so the frequency may not be as much.

212

So I know, you know, especially with

like all, all the stuff with the

213

meme stock hysteria, I'm sure there's

people kind of training the zero

214

DTE lotto on, on Tesla or whatever.

215

But yes, for us we we're focusing

primarily or exclusively on index options.

216

S&P,

217

Adam Butler: And there's

plenty of liquidity.

218

Like could a large player employ the same

strategies that you're, that you're using,

219

or would they have to do different things?

220

David Sun: think it depends

on what you mean by large.

221

So for us, part of the reason we like to

tranche into entries is actually because

222

it makes it so each trade is smaller.

223

Fundamentally we're not

trading in large blocks.

224

and even.

225

The way we manage the strategies

and we kind of do little tricks

226

to, to kind of plan and do that.

227

For instance, when we manage risk, right?

228

Normally you might think of a position,

okay, if I got in for a let's say I sold

229

this option for a dollar credit, right?

230

And I'm trying to exit at $3, which is

a $2 loss, 200%, well, we might kind

231

of adjust that a bit and split that up.

232

Part of it gets out 150%, part of it gets

out at 200%, part of it gets out at 250%.

233

The analogy I use is you're building

three fire exits instead of one, right?

234

So anything we can do to

kind of push that liquidity.

235

But to kind of answer your question

more directly, we might be per trade,

236

you know, a couple dozen contracts.

237

Now that sounds small, but we're doing

lots of trades, so I, I don't think

238

we've ever really pushed, like you can

watch the tape and sometimes you'll

239

see these trades, 500 contracts, a

thousand contracts go through, which

240

maybe at a one-time basis, that's fine.

241

There's a lot, there's a lot of

liquidity now, I think with the

242

market makers, you know, coming

to, to provide that liquidity.

243

But if we suddenly had to, you

know, pull thousand lots in rapid

244

succession, I don't, I don't know.

245

I don't know, nor do I necessarily

wanna find out because once you find

246

out, you know, usually something,

not, something bad is happening.

247

Adam Butler: Yeah, right.

248

I mean, when I think of large, I think of

sort of a, an institutional investor with

249

a few hundred million in their management.

250

I'm just wondering what proportion

of their book they could trade

251

at that, at that timeframe.

252

I mean, obviously you, you know, you're

trading SPX options, so I'm, you know,

253

I'm sure there's plenty of liquidity,

but, it comes and goes, as you say, right?

254

Like the conditions will

dictate the amount of liquidity

255

that's, that's provided.

256

And, um, so I guess is.

257

David Sun: Makes sense because, not

necessarily, but what I wanna point out is

258

when you say conditions, that, that makes

sense because it's always getting into

259

the trade is not, not a problem, right?

260

It's getting out.

261

And if somehow there's, you know, and

everyone's kind of waiting for the

262

next shoe to drop when the next kind

of, they call it Gamma-geddon, right?

263

Because of all, all of

the, the amount of volume.

264

Now, if, if there's a sudden move

and it's one sided and we gotta

265

close out all the positions on

one side, that's a lot different.

266

Yes.

267

It's nice to be able to tranche in

over time, but then if you had to pull

268

everything out, you know, and we've

traded through Covid for instance, and

269

even then the market was fairly orderly.

270

there were some times when the spreads

got kind of wide, but I don't, I

271

haven't lived through like, or I've

lived through, I didn't trade through,

272

like for instance, the flash crash

situations where market makers pull all

273

the liquidity and you know, that's, We

have some contingencies for that as well.

274

But you know, that that's not

something I necessarily look

275

forward to, uh, to witnessing again.

276

Adam Butler: And you know, one of the

things that's the Zero DTE's have gotten

277

a lot of press for is the reflexive

nature of, the leverage at that time

278

scale and how there's potential for

the options players to push around

279

the, the cash deltas, the Delta ones.

280

So do you

281

track that at all?

282

Like, are you tracking the,

directly, the participation of,

283

of other traders and is that.

284

Impacting the way that you take

positions throughout the day

285

David Sun: We've started to

look a little bit at that.

286

Um, there's even some off-the-Shelf

products available to retail that

287

they don't provide the actual direct

dealer positioning, but they could

288

give some signals that, Are based on

how they track the dealer positioning.

289

And we've done some simple modeling.

290

We bought some data, but it's hard to

really find some conclusive signal.

291

generally what we do, beyond.

292

So in the beginning I mentioned there's

some kind of just naive strategies

293

where there's no signal, you're just

selling premium and you have kind

294

of basic risk management, but you're

generally just trying to harvest

295

that, that VRP again, it's sometimes

it's there, sometimes it's not.

296

Especially, you know, lately

market's been moving a lot intraday.

297

Adam Butler: and you're, you're

obviously not, you're not trying to

298

harvest the premium when the, when

the premium is not there or when the.

299

vol relationship is inverted,

300

David Sun: so

301

Adam Butler: or you just selling

the condors instead of buying

302

David Sun: I, so I don't think we can, I

don't think we can necessarily predict.

303

When we, we've looked into it, we haven't,

we don't have any live strategies based

304

on sort of predictions of IV over RV.

305

What we've done recently, a lot of our

strategies that we've introduced signals

306

is more about trends and directionality.

307

And this actually plays into some

of the stuff I learned from the

308

episode of yours on Corey's podcast,

which is, when you look at a

309

trend, well what is a trend, right?

310

To some definition, yes, if

it's going up, I wanna buy, if

311

it go down, I wanna sell it.

312

But how is that measured?

313

How is it defined?

314

And some people can look at moving

averages, you know, this moving

315

average cross over that moving average.

316

Okay?

317

That means it's, it's a plus sell

puts 'cause it's going long or

318

sell calls because it's going down.

319

But what we do is we look at different

ways to kind of perceive or try to

320

predict where a market might be going.

321

So there's there a couple ways.

322

One is we can look at the rate

of volatility contraction.

323

So if the market's going down.

324

The call premiums are decreasing.

325

If we see call premiums at a certain

part of the surface contracting

326

at a certain rate, that will be

our signal that it's a downtrend.

327

And so when we deploy the

premium, we'll lean short we'll

328

sell calls instead of puts.

329

Conversely, if put premiums are

expanding, that's another way to

330

indicate market's probably going down.

331

And yes, they're mirror images

of each other, but they're not

332

gonna react exactly the same.

333

So looking at call contraction and

looking at put expansion can give you

334

the same type of signal, but the timing

and flavor will be a little different.

335

And so what we've done is we have

multiple strategies that are sort of trend

336

following and they'll kind of lean our

exposure long or short, but they all kind

337

of end up at slightly different timing.

338

So if we look at the plot to

equity curves or kind of the

339

the return or the time series.

340

It isn't a perfect correlation between

the various strategies, even though

341

they're all quote unquote trend following.

342

And so that's kind of one

way we've used that concept.

343

And we tend to, whenever we're researching

and developing new strategies, rather

344

than trying to overfit one and trying

to be like, okay, well this, this

345

month we did bad 'cause of this,

so what do we do to address that?

346

Right.

347

And we all know that's kind of a,

futile, um, it, it's not gonna end

348

well because it never matches exactly.

349

So usually whenever we find a new signal

or something that shows good expectancy,

350

we'll just add it to the ensemble

and size everything down accordingly.

351

And I say size down because for us, one

way to vol target, if you will, is just

352

to control how much premium we're selling.

353

It's interesting because.

354

If I sell X amount of premium and

I've determined I'm only gonna take a

355

loss, equal to a certain multiple of

the credit I've sold, Then the credit

356

I sell is a proxy for how much risk

and practice I'm willing to take.

357

And so we call it the way we view a

risk budget, we call it a credit target.

358

And so we will basically allocate

how much premium we're willing to

359

sell to the various strategies, and

then we kind of weight them that way.

360

And so this idea of adding different,

you know, expanding the ensemble

361

and adding as many low correlated

strategies as possible, and using

362

that as a way to increase the, the

sharp ratio of the overall book.

363

Adam Butler: Yeah, yeah, I got it.

364

You're not, you're not trading

each of the new strategies that you

365

add with just adding new, new risk

to, to your risk budget, right.

366

You're, you're averaging 'em all together

and trading the fixed premiums that

367

you, that you want to trade, right.

368

David Sun: Yeah, that's, that's right.

369

And, and I guess I kind of

conflated two different issues.

370

One was the fact that how we add

strategies, but the other one was the fact

371

that we add, as in we add to the book, but

kind of bring everything else down because

372

we're trying to kind of have a, a set

fixed risk budget across the entire book.

373

Adam Butler: right.

374

Got it.

375

And I'm curious, does the, do the

signals that you're using, for

376

example, the premium contraction or

premium expansion inputs or calls,

377

does that translate to other tenors?

378

Like is that a useful signal

at 30 days or 90 days?

379

Have you, looked whether that's a useful

signal for delta ones to identify trends,

380

or is are they very specific to, you

know, zero DTEs or very short-term tenors.

381

David Sun: So the specific ones that

I mentioned that we use, we haven't

382

explored that for other tenors.

383

So the answer is, I'm not sure,

just honestly, like there's so many

384

places to look for signals and, and

it just like never-ending research.

385

A lot of time our, our research

is more just incidental.

386

Like, oh, this happened

and this caused a loss.

387

I wonder what happens um, if

we did this, you know, X, Y, Z.

388

And whereas most people are just,

can only speculate, you know, we

389

fortunately have the, the testing

infrastructure to basically, if you

390

can think of it, we can test it.

391

Right?

392

but there's, the answer is, I, we

haven't really looked into that.

393

But the other point about the Delta One,

we have explored and some of our signals

394

have been applicable to Delta One.

395

Now, one issue though is to make

the P&L kind of meaningful, you

396

have to trade in fairly large size.

397

And when I say size, I don't

even mean a lot of leverage.

398

Like if, if you trade at one x, you know,

notional exposure to your NAV Market

399

goes up 10 bips, you're up 10 bips.

400

I mean, it doesn't sound like a lot,

but we try to keep our daily, you

401

know, P&L pretty tight as it is.

402

And so it just hasn't, we haven't

found a way to do it in a way where

403

we're comfortable with the set.

404

Delta one is Delta one, right?

405

It it's very impactful.

406

So if you're wrong, you

have to fix it right away.

407

And then the execution really

matters because it's that, well,

408

like I said, Delta one, so it's,

it's gonna be that much faster

409

when it moves against you.

410

Adam Butler: Yeah.

411

I mean, trading Delta ones is just a

very different, it's funny talking to,

412

to options guys, because, the Headspace

is just completely different, right?

413

Like you're, you put a bet on, typically,

if you're running institutional style

414

or systematic style options strategies,

then you have relatively fixed risk

415

when you enter, enter the trade.

416

Right?

417

Whereas, you know, trading Delta ones,

even if you've got stops, you still, you

418

know, you on average may have relatively

fixed risk, but every now and then

419

you're gonna get, you're just gonna

get hit with, with something getting

420

blown through your stops, or market's

gonna get halted or something like that.

421

Right?

422

Like it's, very different.

423

Maybe just a take a minute

to explain that, right?

424

Because I think for people who don't trade

options, the idea of being able to very

425

precisely shape the risk you're taking,

may be foreign and also interesting.

426

David Sun: So.

427

As you said with, with Delta One,

basically market goes up, you make

428

money, market goes down, you lose

money as assuming you're long.

429

Right?

430

And with, with options, there's a

lot of ways to, the way we kind of

431

looked at, and I mentioned the term

kind of constructing the risk profile.

432

So we really focus on just that

kind of risk reward, that ratio.

433

So if we take a simple example, if I'm

willing to, you know, risk two to make

434

one, and cause if you sell an option for

a dollar, your max upside is a dollar.

435

and we know you can lose many multiples

of that, but let's say I choose to

436

cap it off at a two-dollar loss.

437

So this is a plan risk two to make one.

438

So if you fix that, then your breakeven

win rate, we're not counting for

439

commission slippage, et cetera, et cetera.

440

It's, it's two-thirds, right?

441

So if you win two out of

three, you're gonna breakeven.

442

And so.

443

Again, simply stated, if you win more

than two-thirds, you'll make money.

444

If you lose less than two thirds,

sorry, if you win less than two

445

thirds, you're gonna lose money.

446

And the rest is just depending

on where that win rate is.

447

And the idea is with like, if I were to

use the same again, a lot of people focus

448

on the hit rate or the win rate, but they

kind of lose sight of that risk profile.

449

If I were to sell, I don't

know, an at-the-money put

450

option, We know at-the-money is

50, deltas about fifty-fifty.

451

Whether or not you win or lose, and I can

set my stop at, two x or whatever, your

452

win rate's not gonna be super high, right?

453

It's probably gonna be

a little bit above 50%.

454

And so that's gonna be below

that break-even win rate.

455

But if I take that same idea, I could

sell a 40 delta out of the money, sell

456

a 30 delta or 20 delta or 10 delta at

some point consistently at that Delta,

457

your win rate effectively over enough

samples will be above, whatever you

458

need to be at a positive expectancy.

459

Right?

460

Again, assuming risk two, to make one,

you can do different kind of profiles.

461

Now there's a trade off because if I start

selling really wingy stuff or sell nickels

462

and dimes, it's it's not very, number

one, it's not very margin efficient.

463

Because if I'm selling nickels and dimes,

sure I have a ninety-nine percent win

464

rate, but then the commissions and fixed

costs is gonna eat up a lot of that.

465

And not to mention if you get hit

with a real black swan, right?

466

Those things explode and you're gonna

lose many dozens, hundreds of times.

467

Right.

468

So there's kind of that, like the

469

Adam Butler: So just to, just

to decipher for people, right?

470

So you're trading the tails,

you're trading very low deltas, and

471

you're getting lots of leverage.

472

and your win rate's extremely high because

you're, you're in the tails, which means

473

that typically the returns, if you're,

if you're in the, first percentile

474

tail, then you expect the returns are

not gonna be in that tail 90 days.

475

Ninety-nine days out of a hundred

kind of on average, right?

476

So you're gonna collect, you're gonna

win Ninety-nine days out of a hundred.

477

But at the same time, you've got

a lot less liquidity when you're

478

trading out in the wings, right?

479

Like it's just, so you've gotta

overcome a lot greater trade slippage.

480

You may not be able to put the same

position size on, or if you, if you

481

do want to put the same position size

on, you're gonna pay more from it or

482

for it in terms of liquidity, right?

483

Sourcing that liquidity.

484

And at the same time, when those,

when you're in that one percentile

485

or ninety-nine percentile tail,

typically you're no longer in a normal

486

distribution that you understand.

487

And that's when that leverage

can really work against you.

488

Is, did, did I kind of cover all

the, Dimensions that you were trying

489

David Sun: You, you

covered all the gotchas.

490

The reason why we don't sell the

super, the tails or the wings and the

491

exact reason why people who say, Hey,

I sell options sometimes, get the eye

492

roll because, I, I think the people,

there's stories of the people, the

493

funds that blow up or of a leverage.

494

And a lot of times it's because

they're just selling the tails.

495

Not just selling the tails,

but having no risk management.

496

But uh, going back to the earlier

example, we found, you know, in some

497

strategy it depends, but somewhere in

the kind of the 10 fifteen-ish delta

498

range, you get a nice balance between

being able to, you sell the premium

499

and you have, you know, your stop loss

or your profit take or whatever it is.

500

And over enough occurrences,

and again, you've defined

501

your risk and practice risk.

502

Two, the make one, for example, that

win rate, it's gonna fall, you know.

503

Somewhere in the

eighty-five percent range.

504

And one other kind of metric that

we kind of look at is, I, I call

505

it premium capture rate or PCR.

506

And it's just a proxy for expectancy.

507

It just means, because I don't expect

to collect and keep every dollar or

508

premium myself, Sometimes I collect

a hundred percent, if it expires, I

509

collect 60% of my profit take, or I

lose 200% if I had to stop after all

510

of that, whatever you net on average,

you know, 10%, 20%, you if your PCR is

511

25%, it's basically you're averaging

25 cents on a dollar that you sell.

512

And for certain tenors, you can get

a, fairly predictable long-term.

513

That's the stress long-term.

514

PCR, right?

515

There's gonna be sequence risk and in

certain times where just everything gets

516

stopped down and you lose it in clusters.

517

But having that kind of probabilistic

approach and idea, again, the focus being

518

on architecturing, that risk profile.

519

Not so much necessarily trying to

maximize win rate, but really trying

520

to maximize expectancy by keeping in

mind where your kind of guardrails

521

are for your, your, trade structure.

522

Adam Butler: Gotcha.

523

And are, are you engaging in any, um, of

the other kind of more traditional, option

524

strategies, like dispersion trading or

correlation trading, anything like that?

525

David Sun: We, we aren't explicitly,

but we may be kind of inadvertently in

526

the sense of we have one strategy where,

and this, this kind of interesting

527

segue into how to hedge these things.

528

because normally another reason why

selling premium gets a bad rep because

529

the jump or gap risk because you can,

yes, it's nice to say I want to get at

530

two, two x or whatever, but whatever does

a black swan, whatever's the gap, right?

531

So those are the things that kind of

blow people up and something that we've

532

explored, which is kinda interesting.

533

It's selling shorter data options

that's so on each day, right?

534

I can sell on Monday, sell

the Tuesday option Tuesday.

535

So one DTE, right?

536

Overnight or Friday you sell the

weekend, you sell for Monday.

537

So you're selling a shorter data option.

538

But we've had to explore hedging them

with kind of longer dated, structures.

539

So if I'm selling like a one DTE, I

might be hedging with like a seven DTE,

540

a longer data straddle, uh, for instance.

541

And that's just kind of one example.

542

And we're trying to uh, I wanna try

to answer that question correctly.

543

'cause when you're, when typically

we talk about dispersion is

544

that, that's kind of more like.

545

Selling index.

546

Uh, I dunno if I get it backwards

selling index and buying like, individual

547

symbol vol or the other way around.

548

That's, so we, we don't do that kind

of dispersion, but I think what we're

549

talking about is more like trying to

sell in one tenor and taking advantage

550

of the overpricing in another tenor.

551

Um, so quick example of the

hedging that I mentioned.

552

You would think that, for instance, if I'm

selling an out-of-the-money option, right?

553

And I'm trying to harvest

the VRP in that structure.

554

If I now tell you I'm gonna hedge it,

but then at-the-money structure, you

555

know, just to buy an at-the-money long

straddle, it kind of sounds kind of

556

impossible because I'm, I'm buying

something that's at the face value

557

gonna be a lot more expensive, right?

558

But what we found is in certain cases,

if you buy at-the-money straddles.

559

And just seven DTE for instance, over

a long, you know, long enough period.

560

You know, we looked over, you know, 10,

11 years that straddle is gonna have

561

a really kind of wild return profile.

562

It's gonna lose money most of the

time 'cause we're not in these kind of

563

high realized volatility environments.

564

But then you hit pockets like Covid or

565

And you get really paid.

566

Now that's really lumpy of a return

curve, because it's gonna be losing money.

567

It's gonna be gaining money.

568

But interestingly enough, over the last

11 years, it's about a net scratch.

569

Now that's kind of coincidental.

570

I, I understand there's a lot of path

571

to end of 2023, buying the straddles

kind of happens just to be zero.

572

'cause you lost a bunch

and then you made a bunch.

573

Now it's a wild curve,

but it ends up to be zero.

574

But if you think about it again.

575

I've just said that buying the straddles

ended up being about a zero expectancy,

576

but if the straddles, those weren't my P&L

generating structure, those were my hedge.

577

So if they're zero expectancy,

close to zero, that's not that bad.

578

Right?

579

Because now I've, I have a

structure that can kind of fully

580

protect these short outta the money

options, whereas it actually doesn't

581

cost me as much as you think.

582

So there's kind of ideas

like that that sort of were

583

Adam Butler: Well, buying straddles

is highly margin efficient too, right?

584

David Sun: Yes.

585

So, So there's, there's like

586

Adam Butler: It doesn't cost you much.

587

David Sun: numerous benefits to

doing this versus the traditional.

588

Yes.

589

Okay.

590

I sell my option.

591

I go buy a wing or I buy, a ratio.

592

I buy two more to try.

593

Those are more of like a Vega hedge.

594

If, if something really there's

a shock, those can expand.

595

But this idea of applying an at-the-money

structure that's kind of longer dated, I.

596

It's, it's sort of turned our

thinking of hedging and how to

597

protect these structures around.

598

So that was kind of a, a kind of

exciting avenue of, of exploration.

599

Adam Butler: Okay.

600

So the idea is, I mean, you're, you're

selling, you're selling vol as the

601

core strategy and you're buying vol

at a different tenor in a different

602

way as your, as your hedge over time.

603

On average, how far back do you think

it's relevant to run your, your kind of

604

back testing of your, of your approach?

605

David Sun: So we have data, we, we,

606

Before that, it's a little dirtier,

the data and it's just less samples.

607

but also with the advent of daily

608

It seems like there's been a bit of a

structural change just because of the

609

market participants and their behaviors.

610

So I think it's a good time for

us to kind of, we're, we're always

611

updating the back test, you know, as

we, we have like a data subscription

612

so we can keep updating the test to

see if our live trading matches it.

613

But I would say at some point I would

614

or post-2022, just because Covid really

kind of reset expectations and just the

615

way the volatility surface reacts and

it'll probably take another decade before

616

it goes back to kind of pre-COVID levels.

617

It.

618

I think it was like from 2008 we had

this big reset and then complacency kind

619

of came in and compressed everything

up until like twenty-twenty, and then

620

again everything kind of blew up.

621

so I don't know if that's like.

622

The perfect answer, but for us, 2020,

623

But I do also separately look at kind

624

there's kind of meaningful change.

625

And sometimes there isn't.

626

I would honestly think the, the

bigger change, which isn't surprising

627

is that because we're showing short

data options, there's just been more

628

opportunities as in literally more trades

in the recent years, which, you know,

629

I think makes the data more reliable.

630

Adam Butler: Yeah.

631

Right.

632

It's, it is a tricky thing in, finance,

this idea of non-stationarity, right?

633

Where you've got, you've got a

regime, you've, you've run all

634

your testing against this regime.

635

90% of your data comes within

a certain regime, and then, you

636

know, you're always wondering,

has something structural changed?

637

Right.

638

And I, you know, I think it's fair

in your space, and I'm sure to a, to

639

some degree in markets in general.

640

I.

641

to say that there is a change in,

in character over time, and they're

642

gonna affect those changes are

gonna affect different types of

643

strategies, more or less than other

different types of strategies.

644

And, you know, sort of continues to

lean in the direction of trying to

645

diversify the strategies that you

run and the sources of risk that

646

you're harvesting returns from,

to the greatest extent possible.

647

So, I mean, is that something

you guys have considered?

648

I mean you, I understand you

sort of started with this kind

649

of return stacking approach.

650

have you continued to look for more

sources of risk to harvest or, have

651

you been sort of content to continue to

play within your, vol selling sandbox?

652

David Sun: So we have, I, I think we're

still primarily, predominantly kind of

653

in that vault, selling sandbox, but, on

the zero DT side, sometimes, depending

654

on the signal, we, we, we have a few that

are long vault, so we will occasionally

655

deploy just a small allocation to just

buying, you know, outright buy a putter

656

call and that can pay off because.

657

Again, there's been days where it's

moved multiple standard deviations

658

beyond the expected move and you get,

you know, I dunno if you remember top

659

of your head, but in late December

660

where the market sold off like 60

handles in the last, uh, couple hours.

661

So, that was a nice payday there.

662

beyond that, the idea of, um, even that,

the idea that I just mentioned about

663

kinda hedging with the straddle versus

the typical buying wings or a ratio,

664

whatever, it's just more thinking about,

ways to, but yes, thinking of not just

665

short ball, but different ways to apply

long volatility strategies, as a way to

666

kind of provide another return stream.

667

But beyond that, one thing that we

have added, and part of the reason

668

I, you know, kind of follow you

and Corey and kind of the work you

669

guys did is the idea of adding.

670

trend following as kind of another.

671

It, it's uncorrelated.

672

We, we know that, so like typically people

talk about, you know, stocks, bonds,

673

and correct me if I'm wrong, but trend

following itself sometimes considered

674

like a, like a third asset class.

675

And so, we've looked at not, we

looked at, we have like, we allocate

676

to kind of a basket of these trend

following ETFs, you know, including

677

you guys, the one you guys have.

678

And, uh, it's been interesting

to follow that space and being

679

able to get that exposure.

680

and one thing I had mentioned, I

want to email you some topics to

681

talk about today, is the idea of how

something like that can even apply

682

at the retail level and specifically

why I think that's interesting.

683

And for nowadays, which is the

kind of the proliferation of like.

684

Products and exposures accessible at

the retail level because before, you

685

know, you could only get access to

trend following via like a mutual fund

686

or some kind of private hedge fund.

687

But having that liquid wrapper, and one

thing that's interesting is the ability to

688

get capital efficiency and kind of build

return stacking portfolios in your own

689

account, because you can hold these ETFs.

690

And whereas before I mentioned our

old model was buying that pure,

691

pure beta and stacking alpha, we,

we changed up the model for that

692

one front now is focusing more on

non-correlated as low beta as possible.

693

So actually the model transition to

where we, we got rid of the the market,

694

the traditional S&P index funds.

695

Now we have a basket of trend following

ETFs and we kind of stack these other

696

options, strategies, and really what the

drive to have as little beta as possible.

697

and what I found interesting is, the whole

premise of your return stack products,

698

right, is the capital efficiency.

699

And when you talk to, you know, I guess

as an advisor who was talking to a client

700

and why they should, you know, typically

the friction was they don't wanna sell

701

off their stocks or bonds or whatever it

is to make room for the trend following.

702

And that, and that's why you got

these capital vision building blocks.

703

Now as someone who's a self-directed

investor, haha the fact that you

704

can buy, for example, RSBT, which

is return stacked and is inherently

705

leveraged, but your brokerage can allow

that in and of itself is marginable.

706

And you can layer an option

strategy on top of that.

707

You, you're basically

triple dipping the capital.

708

So I kind of find that.

709

Pretty interesting and, and we

should caveat, you know, you

710

gotta do your own homework.

711

This is not kind of a recommendation

to leverage on top of leverage, but

712

the idea to, you know, now even as a

retail person, if you have portfolio

713

margin, you can buy T-bills, you can

allocate to trend following ETFs, then

714

you can layer these options strategies

on top of that and it can really create

715

something unique that institutional

grade leverage capital efficiency

716

that wasn't possible, a few years ago.

717

Adam Butler: Yeah, it's, it's funny

how once you begin to think in risk

718

space or you employ derivatives, then.

719

This whole idea of an expanded

canvas, just, I mean, it

720

becomes second nature, right?

721

Like the idea of you've got

a fixed amount of capital.

722

How can I put this capital to work

in as many ways as possible that

723

are, you know, mutually diversifying.

724

So I'm harvesting risk from

as many different sources as

725

possible that are hopefully not

correlated to the same risk factors.

726

In other words, you don't expect

them to react negatively to the

727

same financial or economic events.

728

It's, you know, how can I stack

as many of these different premia

729

into my portfolio as as possible?

730

Right?

731

And the whole idea of leverage is, it

doesn't even make any sense, right?

732

I mean, even once you go to where

you're mixing stocks and bonds

733

in a portfolio and you want to.

734

Have them effectively

diversify one another.

735

And you realize that stocks are so

vastly more volatile than, than bonds

736

for the most part, that, if I want to

have equal risk or if I want to have

737

them well diversified, I either have

to accept a really low volatility

738

portfolio that's mostly bonds, or I

can use all of the array of different

739

derivatives or products that underlying

them contained derivatives to expand my

740

canvas and, gain all of this, you know,

diversified access to all of these premia.

741

And the leverages kind of

washes its own face, right?

742

It, it becomes a trivial aspect

of that, of the whole approach.

743

The leverage is, is this, you know, four

letter word for for many retail investors.

744

Once you realize that you get, you really

want leverage to expand your opportunity

745

for diversification, not so that you

can take on more concentrated risk.

746

The leverage kind of fades away, right?

747

And then this return

stocking becomes so obvious.

748

David Sun: Yeah, I, I think, you

know, if the definition of leverage

749

is just your exposure on a notional

basis is above your NLV, then yes,

750

we're, we're all taking leverage.

751

But I guess it's sort of like a, kind

of loses again, like you said, the

752

opportunity set that's available if

you're simply just trying to expand

753

or avoid having that larger exposure.

754

But knowing that the exposure you're

looking for is non-correlated, right?

755

You're not looking to buy a bunch

of, you know, different stocks on

756

margin and having a concentrated

beta exposure, for instance.

757

Is that the point is you're trying to have

as many uncorrelated sources as possible.

758

Adam Butler: Yeah, yeah.

759

You're trying to generate

wealth over the long term.

760

You're not trying to get

lucky over the short term.

761

Right.

762

With this kind of, with, the leverage

that we're, we're endorsing for, you

763

know, this return stacking concept.

764

David Sun: And along the lines of

the return stacking, one thing I I, I

765

found kind of interesting, the way to

approach things is because when you're

766

investing, you know, there's this kind

of dichotomy between fully passive

767

investing, which is just buy in the next

fund, close your eyes, and on the other

768

side is, you know, staring at the screen.

769

Typical kind of day trader looking at

setups and, and fully active, but sort

770

of in the middle, like one step above.

771

Just allocating to S&P is a

permanent portfolio, right?

772

60 40 or Harry Brown, or Golden Butterfly,

whatever it is, you're, you're allocating

773

different assets, and you're gonna

rebalance them, but that's gonna provide

774

you some better risk adjusted return

than just having that one asset class.

775

Fully allocated.

776

And then above that is the idea.

777

So these are, you know,

what is an asset, right?

778

It could be stocks, bond,

gold, real estate, whatever.

779

But the idea is for us, when we talk

about a systematic option strategy, like

780

a put selling, you know, like I mentioned

earlier with the profit tag and the stop

781

loss, I see that as something that's

gonna be the same repeated occurrence,

782

the same mechanics over and over.

783

And when you repeat that the set

of mechanics over and over that

784

strategy is gonna have a sort

of a expected return profile.

785

We, we can kind of know what the return

over long term, what the volatility, what

786

the, you know, what the risk profile is.

787

Well, if you're gonna say that, I

mean the, the whole point of building

788

portfolios is, you know, gold is

gonna have a certain risk profile,

789

certain behavior, you know, stocks

are gonna have certain behavior.

790

And so this concept of

strategies as assets, right?

791

The fact that we're doing all of

these different strategies, it's

792

not like we're, you know, what,

what does active really even mean?

793

Right?

794

It's, I, I have this term I call like

actively passive investing, right?

795

What's to say?

796

I have a permanent portfolio of these

five assets, and one asset isn't just

797

this one systematic strategy that I run.

798

And so it, it doesn't necessarily have

to be like some super exotic concept.

799

The fact that we're trading options

trading derivatives, It's just another

800

way to build a portfolio basically.

801

Adam Butler: Well, yeah, I mean, in the

end you're harvesting your harvesting

802

an explicit risk premium, right?

803

I mean, and, you're, it's designed

strategy is designed to do that.

804

Some of the, alternatives.

805

It's a little harder to tease out

what the underlying risk premium is.

806

You know, trend following is one of these

strange ones where, really is a, has a

807

history of being phenomenal diversifier.

808

there's no clear risk that investors

who are investing in trend following

809

are accepting in return for their, um,

the long-term profile of, their returns.

810

but it has been so reliable over

time and there's such a reasonable

811

explanation for why the phenomenon

exists and persists that many still

812

sort of choose to, to have it.

813

But I think at the highest level of

abstraction, really, your, you've got

814

a bunch of strategies that are gonna

try to triangulate on harvesting vol..

815

You've got a bunch of, you know, in a way.

816

Straight up long only equities is

a way to harvest of all premium.

817

Right?

818

Does sort of prompt the question, why

not try to harvest of all premium in

819

a variety of other markets too, right?

820

Like, why aren't we, selling

vol on, on gold or on treasuries

821

or on oil or what have you?

822

And there are funds that do that, right?

823

And you've got this sort of

diversified vol selling, approach.

824

And then you've got other strategies

like global carry trend following.

825

Then you've got the stock

specific strategies.

826

So you wanna be sort of market

neutral but biased towards, you know,

827

cheap companies, over expensive,

biased towards lower volatility

828

companies, over higher volatility,

higher quality, over lower quality.

829

You can sort of, you see

how this canvas expands.

830

And you just want to have exposure

to as many of these different premia

831

or styles or factors as possible.

832

And then there's a layer above that

as you sort of say, which is kinda

833

the strategy that you're gonna

use to gain that exposure, right?

834

And for those who are a little more

sophisticated, you want to, you

835

want to do some due diligence there.

836

But the general concept is just expand

your canvas, gain as much, gain access

837

to as many different, style premia or

risk premia as possible, and be maximally

838

diversified at a risk tolerance that you

can accept over the long term, you know,

839

that allows you to hit your, uh, return

targets and your financial objectives.

840

And it really kind of

is as simple as that.

841

David Sun: And the interesting thing

about is being maximally diversified,

842

we found it doesn't necessarily have

to be maximally diversified into assets

843

that make the most return per se.

844

What you want really is assets or

strategies that lower volatility, right?

845

And can kind of, really minimize

the volatility drag that you

846

might incur from a large drawdown.

847

And one specific example is, that,

that concept I mentioned earlier about.

848

Hedging with a long straddle,

like who would've thought of that?

849

Right.

850

But, we have this term we call a a

zero EV or zero expectancy strategy.

851

And back in the day, like when we were

testing different things, we might reject

852

an idea just for having a low return.

853

But nowadays huh we'll be like,

Hey, let's, let's put that into,

854

and we have some spreadsheets.

855

We can kind of blend in strategies

and look at the overall book.

856

Like, let's see how that strategy

plays off the other ones we have.

857

Does it do well when the

ones we do don't do well?

858

Like we don't care if it makes money

long term, as long as it kind of makes

859

the bad days a little less bad, right?

860

Because every single time you can reduce

a drawdown, you're, you're incrementally

861

reducing that volatility drag.

862

Volatility drag is always

working against you.

863

So if you can inject something that

isn't necessarily P&L generating

864

and, and that's the idea of that the

shaman's demon, that there's sort of

865

this convergent property where you can

actually squeeze out more return if you're

866

rebalancing over time by the fact that

you're able to minimize that volatility.

867

I.

868

Adam Butler: Yeah, exactly.

869

I mean, the more bets you add to

the portfolio that are independent

870

and they're, exposure to different

risks, then the more you're able to

871

generate returns with lower volatility.

872

And that is just generally the

secret to long-term wealth creation.

873

But it's also very hard for many to stick

with because, you know, for example,

874

the last decade, any effort to diversify

away from cap-weighted US equities

875

has kind of made you look foolish.

876

Right?

877

Because, every diversifier for the most

part have underperformed, cap-weighted

878

equities as we've had this massive.

879

Concentrated, tech equity rally, right?

880

So, you know, it's just, you've

got these different kinds of risks

881

that people are willing to take.

882

And one of them is your

willingness to be meaningfully

883

different than your peer group.

884

If you see your peer group getting

very wealthy, very wealthy over a

885

short time horizon, that can be very

painful because nobody wants to be

886

sort of left behind or left out.

887

And so, you know, one thing I know

I've learned in my 20 odd years

888

in this business is that most

people just cannot stand to be

889

anywhere near mean variance optimal.

890

Like the whole idea of trying to maximize

diversification scale your portfolio

891

to generate, enough returns while

preserving that diversification and just.

892

Not really caring whether you're

gonna deviate from that one narrow

893

risk factor, which is U.S equities,

that is very very small percentage

894

of people can, can tolerate that.

895

So, you know, a, a dimension of

this equation is always, you wanna

896

have the most diversified portfolio

that the investor is gonna be

897

able to stick with long term.

898

Because the worst thing that

can happen is them bailing on a

899

strategy because it deviates too

far from their emotional benchmark.

900

and that almost always happens at

precisely at the wrong time, which

901

means that you capture all of that,

all of the risk from being different

902

without then harvesting those

extra returns from being different.

903

So there's always a balance there.

904

David Sun: Yeah, interestingly, what

you just mentioned was exactly why.

905

Our original model for the first fund

was the way it was, it was, okay,

906

let's get the beta, we'll just track

the market and we'll just make it

907

sort of a relative return kind of

product where if we can just kind of

908

incrementally get a little bit more yield.

909

although, uh, I, we changed that up at

910

the best time, but because fundamentally

my, my kind of views of market risk

911

in general, not just us, but just like

the world and it's stocks gonna go up

912

forever and now end up going up another

year and then we'll see how this year,

913

you know, it's, it's only February now

and we're up like another four or 5%.

914

So it's, it's hard to say.

915

Obviously no one can predict,

uh, what, what's gonna change.

916

But, that that was the thesis behind

kind of breaking from that old model.

917

Just the trying to not, you

know, basically be concentrated

918

in, in just stock beta.

919

Adam Butler: Yeah, so are you

guys thinking about starting fund

920

number three or is there plenty

to do in funds one and two?

921

No need to branch out into strategies

that are sufficiently different to

922

justify the launch of a third fund.

923

David Sun: Um, I, I think right now it's

just gonna be funds one and two because

924

it was, originally the spin out to get

the zero DTE concept that that made sense.

925

But now between the two, there's so

much like places, avenues to explore

926

and, and really just kind of adding

more strategies to, uh, to the book.

927

Whenever we, like I said,

something new, we just kind of

928

scare everything down, add it in.

929

not to say there isn't a reason

for a third one, I, I guess it's

930

just some reason to kind of compel

us or, or some fundamentally new

931

mandate that we wanna pursue.

932

But, but at the moment, I, I

think that the two that we're

933

doing, have a sufficient, kind

of uniqueness between the two.

934

That, that, you know, people can kind

of choose which, which one they like.

935

Adam Butler: Yeah.

936

No, it's a, it's a very

interesting profile.

937

It is, it's amazing the number of

ways that people have come up with

938

to, harvest that volatility premium.

939

And it's enormously powerful.

940

I.

941

So David, um, where can people find you?

942

Do you have a public presence at

all that people can interact with

943

you or do you remain mostly private?

944

David Sun: Um, the funds

themselves are mostly private.

945

Like I don't typically name them,

you know, on air, on the podcast,

946

although if people wanna reach

out in, in private, certainly I'm

947

happy to kind of talk about that.

948

My, my public presence, as I kind of

alluded to earlier, was more on my

949

outreach and my podcast, uh, as far

as the retail education so that people

950

are curious and to learn about some

of the concepts and, and strategies.

951

Uh, the, the podcast is

called The Trade Busters.

952

So, and then my Twitter handle,

I think the one I reached out

953

to you is at the trade Buster,

although I guess that should be.

954

X now not, not Twitter.

955

but there, there's plenty on there.

956

And, and people like, again, uh, IE

even as sort of a, having gone to

957

the other, quote unquote other side,

I, I still sort of associate myself

958

with the, the, the retail crowd.

959

'cause that's kind of

where, where I got my start.

960

so I do the podcast and stuff

kind of as a way to reach out and

961

try to make my difference in, in

the retail education landscape.

962

Adam Butler: That's great.

963

I mean, I find that

podcasting also kind of, uh.

964

Keeps you honest, right?

965

Like, you're you're explaining

things to people means that you

966

need to make sure that you've got a

deep, fundamental understanding of

967

the things that you are explaining.

968

And, uh, as you search for things to

educate people about or to, to talk

969

about on the podcast, or for me,

it was always writing, papers and

970

blog articles, that sort of thing.

971

Then you're constantly learning,

you're climbing the learning curve

972

and exploring new dimensions of this

almost infinitely, curious domain

973

that we, that we occupy, right?

974

Um, no one's really solved the market yet,

so there's always new things to learn.

975

David Sun: Yeah, definitely,

976

Adam Butler: Well, it's been fantastic.

977

Really glad you reached out and, uh,

we had a chance to connect and do this.

978

Thank you very much for your

time and for sharing all of these

979

valuable insights and, um, I'm sure

there'll be an occasion for us to

980

do this again in the next few years.

981

David Sun: definitely.

982

And again, thanks, thanks for all

you've, all the impact you've had

983

on, on us and our, our own methods.

984

So, uh, can't say enough about that.

985

Adam Butler: gratifying.

986

Thank you.