Volatility hedge fund QVR Advisors, led by 20-year options veteran Scott Maidel, is taking aim at Wall Street’s booming options-selling strategies, which have grown so popular that they may now be undermining their own profitability, according to a report by Bloomberg.
As retail and institutional investors flock to funds that sell stock derivatives to generate steady income, the short-volatility trade has ballooned to a $100bn market. However, Maidel warns that the surge in options-selling has changed pricing dynamics, making these strategies less attractive than before.
“The problem is pricing has materially changed,” Maidel, QVR’s head of hedge fund business, explained. He specifically pointed to the explosion of call-writing funds, which sell bullish options contracts in bulk while maintaining long positions in stocks.
QVR Advisors, a $2bn volatility-focused firm based in San Francisco, has launched a new strategy this year designed to capitalise on the relentless options-selling activity from massive funds like JPMorgan’s $37bn Equity Premium Income ETF (JEPI), often referred to as an “options whale.”
JEPI employs an “overwriting” strategy, which works well when markets are stable or declining, allowing call sellers to collect premiums as their bullish options expire worthless. QVR, in contrast, combines long equity exposure with a convexity alpha play, buying up cheap derivatives that pay off when market volatility spikes unexpectedly. QVR claims this approach has consistently outperformed JEPI in backtests, offering a compelling alternative for clients seeking strategies outside the crowded options-selling trend.
“We’re looking to do generally the exact opposite of the herd mentality,” Maidel said.
