John Succo, Partner, SS Financial

When it comes to equity derivatives, few individuals have traded more options than John Succo.  Across a career in markets spanning more than 3 decades, John has managed convexity risk on both the sell-side and buy-side, through high and low vol periods and across single stock and index options.  During the course of our discussion, John shares many rich stories.  He brings to life the early days of career – one in which option pricing inefficiencies were significant across both strike and time.  He describes one of the large, early hedging trades he orchestrated in 1989 – a collar on S&P 500 shortly before the UAL mini-crash in October.  And he has plenty to say about the spectacular blow-up of LTCM, an outcome that surprised him very little.  A theme throughout our conversation is John’s careful attention to sizing positions and his overall objective of remaining long gamma.  While the lean periods for volatility make this challenging, John successfully managed decay through active position management, trading the range in volatility and offsetting some of the bleed from long single stock vol by selling index volatility.  The result was that his hedge fund, Vicis Capital, became looked upon by institutional allocators as a valuable  addition to a portfolio of generally correlated risk-assets.  The orthogonal nature of the return stream from Vicis was of great value for investors in the period leading into and through the financial crisis.  Today, John is a partner at SS Financial, and remains a keen and skeptical observer of markets.  On his mind mostly is debt and the view that it is the sudden stop of unsustainable leverage that usually figures complicit in big vol events.  Please enjoy this episode of the Alpha Exchange, my conversation with John Succo.

Om Podcasten

The Alpha Exchange is a podcast series launched by Dean Curnutt to explore topics in financial markets, risk management and capital allocation in the alternatives industry. Our in depth discussions with highly established industry professionals seek to uncover the nuanced and complex interactions between economic, monetary, financial, regulatory and geopolitical sources of risk. We aim to learn from the perspective our guests can bring with respect to the history of financial and business cycles, promoting a better understanding among listeners as to how prior periods provide important context to present day dynamics. The “price of risk” is an important topic. Here we engage experts in their assessment of risk premium levels in the context of uncertainty. Is the level of compensation attractive? Because Central Banks have played so important a role in markets post crisis, our discussions sometimes aim to better understand the evolution of monetary policy and the degree to which the real and financial economy will be impacted. An especially important area of focus is on derivative products and how they interact with risk taking and carry dynamics. Our conversations seek to enlighten listeners, for example, as to the factors that promoted the February melt-down of the VIX complex. We do NOT ask our guests for their political opinions. We seek a better understanding of the market impact of regulatory change, election outcomes and events of geopolitical consequence. Our discussions cover markets from a macro perspective with an assessment of risk and opportunity across asset classes. Within equity markets, we may explore the relative attractiveness of sectors but will NOT discuss single stocks.