The financial markets have seen substantial growth since the pandemic-related downturn nearly four years ago, yet concerns linger about the future, especially amidst geopolitical and economic instabilities.
“It’s natural to feel uneasy after a big advance,” remarked Adrian Lechter, founder of Volbot, a startup hedge fund based in Miami. Lechter suggested that those apprehensive about interest rate volatility might find risk-defined trades, such as options butterflies or 0 DTE straddles, advantageous in the current environment.
“While historical data on the correlation between rate declines and market downturns is limited, the trend of the Magnificent Seven surging in 2023 was evident. It’s inevitable that there may be some correction,” Lechter added.
With a decade of experience in both markets and technology, Lechter draws from his background, which includes managing derivative positions at the Chicago-based Belvedere Trading after completing studies in economics and math at the University of Pennsylvania.
“Reality often diverges from consensus expectations,” he noted, recounting a scenario from nearly a decade ago when China’s unexpected rate hike, with just a 5% likelihood, led to a flurry of activity at his trading desk.
After a hiatus spent traveling and working in technology at Uber Technologies Inc and Wag! Group Co, Lechter has reignited his passion for markets with the launch of Volbot, citing their egalitarian nature as a driving force.
“From a young age, I enjoyed finding glitches in games, such as Electronic Arts Inc‘s FIFA,” he quipped. “While it’s more challenging to find real-world glitches, my experience as a market-maker and in tech has equipped me with knowing where to look.”
Despite advancements in market structure and technology, human involvement continues to play a pivotal role. Lechter aids institutional investors in leveraging the market’s mechanical and reflexive tendencies to minimize losses during tumultuous times.
“Since 2016, market-making has evolved significantly, but the fundamental principles of adjusting models and active trading remain pertinent,” he emphasized. Lechter highlighted the rise of products like daily option expiries and increased automation, presenting exploitable opportunities on both sides of the market.
Volbot’s strategies are proprietary, tailoring trade structures that may include the aforementioned complex options spreads. Since its inception, Volbot has attracted 16 investors, including family offices. Lechter underscored Volbot’s success, noting an 8% return last year and a 17% return the year prior, despite challenging market conditions.
“My two-to-five-year vision is to serve more institutions, designing a strategy that could deliver double-digit returns in both bull and bear markets with a Sharpe and compounded annual growth rate highly appealing to such clientele,” he elucidated.
Disclaimer: The author of this story, who covers fintech at Benzinga, previously worked with Adrian Lechter at SpotGamma, a market data, and insights platform.
Image by MustangJoe from Pixabay.
