Hari Krishnan – Hedging a Commodity Bull Market (S7E4)
Corey Hoffstein and Hari Krishnan dive into the complexities of commodity markets, discussing client-directed research, trading options on futures, and grain markets. They explore hedging asymmetry, trend following strategies, and the dynamics of depressed commodities. Hari shares insights on right tail underpricing, consumer behavior, and a forgotten commodity. The episode contrasts fundamental and quantitative approaches, addressing liquidity constraints and examining perishability, seasonality, futures spreads, and options. They wrap up with Hari's personal goals, future research interests, and inspirations.
In this episode I am joined by Hari Krishnan, Head of Volatility Strategies at SCT Capital and author of the books Second Leg Down and Market Tremors.
This is Hari’s second appearance on the show, but he comes to us with a very different topic: how to develop a low carry hedge for a commodity bull market.
Taking a similar line of thinking to his book Market Tremors, Hari evaluates the market through the perspective of both commodity producers and consumers. By understanding their business incentives, Hari believes he is better able to understand their market positioning and the potential imbalances created in both futures and options markets.
We discuss the conditional impacts of price on real world costs, how perishability impacts derivative markets, and the influence of seasonality.
I hope you enjoy my conversation with Hari Krishnan.
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Transcript
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