Bill Gebhardt - Replicating Discretionary Commodity Trading Systematically (S7E9)

Flirting with Models

Flirting with Models is the show that aims to pull back the curtain and meet the investors who research, design, develop, and manage quantitative investment strategies.

Bill Gebhardt - Replicating Discretionary Commodity Trading Systematically (S7E9)

S7 E9 • Jul 1, 2024 • 52 mins

Corey Hoffstein converses with Bill Gebhardt about his transition from engineering to finance and his current role at ten Dynamics. They explore the intricacies of risk management, the dangers of optimization, and the balance between long-term and short-term trend signals. The discussion covers transaction costs, time factors in trend analysis, and the importance of robustness in binary signals. Bill shares insights into systematic trading, including risk budgeting strategies and market condition cyclicality. They also touch on trading individual stocks, European commodities, and the operational complexities of shorter time frames. The episode concludes with Bill's philosophical interests and reflections on consciousness.

Key Points

Bill Gebhardt's transition from a discretionary to a fully systematic trading approach highlights the importance of blending fundamental insights with automated processes for improved signal and risk management.
Ten Dynamics' approach to risk management, which involves dynamically adjusting risk exposure based on model confidence and real-time validation, underscores the critical balance between automation and human oversight in systematic trading.
The inclusion of European commodity markets and large-cap individual stocks in their trading strategy provides diversification and leverages the trending properties of these markets, which are often overlooked by traditional trend followers.

In this episode I speak with Bill Gebhardt, founder of 10Dynamics.

Bill spent the better part of his career as a discretionary energies trader, with roles at Koch Industries, Merrill Lynch, Deutsche Bank, and Trailstone. In May 2020 he struck out on his own to co-found 10Dynamics.

Given Bill’s fundamental and discretionary background, it may come as a surprise that 10Dynamics runs a fully systematic process. This dichotomy serves as the foundation for much of our conversation, where Bill provides insight into where and how his discretionary background informs the systematic process, both from a signal and a risk management perspective.

We discuss the types of signals 10Dynamics incorporates into their process, how their risk management system is designed to reflect Bill’s experience managing discretionary traders, and how they’ve designed their operational risk management to allow them to trade intraday with a small team.

Please enjoy my conversation with Bill Gebhardt.

Speakers

Corey Hoffstein

Host • 22%

Bill Gebhardt

Guest • 77%

Chapters

0:00	Introduction to Flirting with Models and guest Bill Gebhardt
0:16	Sponsor: Newfound's return stacked mutual funds, ETFs, and model portfolios
0:30	Bill Gebhardt's background and career transition to ten Dynamics
3:09	Early career and shift from engineering to finance
7:15	Insights on risk management and optimization dangers
10:56	Long-term vs. short-term trend signals and risk management
17:40	Transaction costs and time factors in trend analysis
21:31	Binary signals and robustness in trend following
24:21	Risk management significance in systematic trading
26:29	Portfolio and position level risk budgeting strategies
29:39	Market condition cyclicality and alpha since the 1990s
33:38	Trading individual stocks and European commodities trending
38:55	Shorter time frames: Operational complexities and risk management
44:56	Systematic risk controls and team organization
47:59	Balancing rules with human oversight in systematic trading
50:22	Bill Gebhardt's interest in consciousness and philosophy
51:25	Episode wrap-up and closing remarks

Transcript

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