Using the Yield Curve to Forecast Volatility

Published on
June 18th, 2019
58 minutes

Using the Yield Curve to Forecast Volatility

Skin In The Game ·
Featuring Harley Bassman and Michael Green

Published on: June 18th, 2019 • Duration: 58 minutes

Harley Bassman, founder of The Convexity Maven and inventor of the MOVE Index, sits down with Mike Green of Thiel Macro to talk volatility, MMT, and Bassman’s strategy for structuring his trades. In this no-holds-barred interview, Bassman also speaks to several indicators he’s using to determine when the volatility tide will turn. Filmed on May 22, 2019 at the EQDerivatives conference in Las Vegas.



  • CL
    Christopher L.
    14 August 2020 @ 06:05
    This shit is spot on
  • CY
    Charles Y.
    21 March 2020 @ 20:11
    Watching this after the Covid sell off is an eye opening interview! If only I had seen it earlier 😅
  • ef
    ethan f.
    10 December 2019 @ 21:47
    Absolutely superb. I've had many wonderful mentors in my life, in numerous fields. Mr. Bassman is clearly a wonderful thinker and clear explainer. I too have watched this repeatedly. Thank you.
  • BS
    Brian S.
    18 June 2019 @ 17:10
    Stopped watching after this guy said the inflation of the 1970s was driven by growth in the baby boom generation. Does he not realize that we went off the gold standard in 1971 and THAT was the source of inflation, with the currency becoming significantly devalued? Wow.
    • MG
      Michael G. | Contributor
      18 June 2019 @ 17:17
      I disagree with you as well. You missed a lot of good information, because you’re unwilling to consider the mainstream narrative could be wrong.
    • JL
      J L.
      18 June 2019 @ 22:51
      actually this is a point to be considered very seriously, and I feel the mainstream narrative has always related more to demographics than the gold standard...
    • SS
      Shanthi S.
      19 June 2019 @ 04:57
      Presumably there could be more than one contributing factor. I thought the interview was brilliant. Will listen a second time. You missed out.
    • PC
      Philip C.
      19 June 2019 @ 06:28
      Nixon depegged dollar/gold in Aug 1971. DXY porceeded to fall ~15% while headline CPI tripled. DXY flatlined around 100 for the next few years yet CPI skyrocketed. Inflation is base effect hence your point is only partially accurate. See image below. Some charts supporting Harley's view:
    • RC
      RJ C.
      19 June 2019 @ 16:29
      If your judgement of a person can entirely be summed up by you thinking they are wrong about 1 item, it says much more about you than them.
    • IF
      Ian F.
      21 June 2019 @ 21:11
      Brian S. - You are assuming the tail wagged the dog. You have to think about why Nixon pulled the gold standard in the first place. It would have forced deflation if he hadn't. Why? A fixed money supply in a growing economy, at a time when the the biggest generation were coming of age and starting to consume. He would have had to reduce the money supply significantly to hold it = another great depression.
    • RM
      Ryan M.
      7 July 2019 @ 05:17
      In the '70s there were oil shocks that resulted in inflation which resulted in wage growth through COLAs, which was positively reinforcing. Also, no globalization, no internet, and not nearly as much excess capacity due to prolonged period of low interest rates. Granted there was more TFP growth in the '70s than now, which should have helped cool inflation. Not sure if I'm sold on demographics story in 2020's though.
  • DS
    David S.
    27 June 2019 @ 18:58
    Thank you very much Mr. Bassman and Mr. Green. I watched this presentation at least 5 times. I learned a great deal about how I should understand and approach the market. I hope we do not need to wait until next year to see both of you again. DLS
  • DS
    David S.
    23 June 2019 @ 00:19
    It is obvious that MMT will generate inflation by increasing the money supply. The question is at what rate? The Fed and other CBs assume that a 2% inflation is reasonable for a stable economy - just a guess. MMT, Congress and the administration printing and spending money, will certainly get inflation going. The question is who will benefit and how will Congress control MMT? Who in Congress and the administrations will stop increasing the US dollar inflation at 5%, 10%, 25% or much more? Congress will be like Mickey Mouse in the Sorcerer's Apprentice. Nothing will be able to stop the money flowing. It may not be like Venezuela, but it will follow the same path. DLS
  • RM
    Ryan M.
    22 June 2019 @ 23:48
    This ladies and gentleman, is why I pay for Real Vision. Thank you.
  • IP
    IDA P.
    22 June 2019 @ 07:36 this is why the correlation is changing......
  • MC
    Mario C.
    20 June 2019 @ 07:18
    Great interview content really, much above my expectations. Not only is MG as great as usuall, but Harley Bassman matches up, really great inshigts. Especially the 2nd part regarding the trade ideas: - the Eurostoxx div future trade and rational is spot on: it's not new at all. It's the same market distortion due to the retail structured products that impacts the vol market structure (cf. the 1st interview of MG vol series). This issue was even more extreme in the Nikkei div market structure back in 2009-2013 (up to start of Abenomics). You had the long dated div yield curve completely distorted: 5Y Nikkei implied div yield as low below 0.50% (vs 2% spot div yield at the time), and not a financial institution or a hedge fund to put the trade on. This trade was a no brainer, and did make a killing - the EURTRY 20M zero-cost short butterfly: I don't understand HB explanation of his payoff profile. A standard butterfly is 2x long body option, vs short 1x each of the wings... . If he is short the 7-9-11, he gains for eurtry<7 or >11 at maturity, and loses if eurtry in the [7:11] range. What am I missing there?
    • WY
      Weikun Y.
      21 June 2019 @ 18:33
      I think there's a 20Month forward priced in
    • MC
      Mario C.
      21 June 2019 @ 19:34
      actually I found the trade on his website. It's not a butterfly. It's just a Zero Cost long put (strike ~7) finances by a short call spread (9-11). Max loss 2. That's an interesting, but balsy trade
  • GF
    Guillaume F.
    21 June 2019 @ 00:35
    Great interview! I have really enjoyed it!
  • BF
    Brad F.
    20 June 2019 @ 22:01
    Excellent video. The best I have seen in ages. True RealVision gold from the old days! Please can we have a “the one thing” on convexity. And more like this. Mind blown...
  • SH
    Stephen H.
    20 June 2019 @ 04:38
    Great interview, job well done Mr Green for driving such an interesting conversation with Mr Bassman. Always interesting to hear the take on demographics and impact and Mr Bassman's suggestions re sizing and structuring are key.
  • WA
    William A.
    20 June 2019 @ 03:49
    Great job by all involved. I've found Mr. Bassman to be a great asset. Use his web site. As well, he is quite accommodating. A reasonable guy who will interact in a helpful way. Nice guy and a true pleasure.
  • RK
    Robert K.
    20 June 2019 @ 00:45
    smart cookie
  • VG
    Viktoriia G.
    19 June 2019 @ 20:34
    Great interview, only notationwise a bit confusing. Regarding the trade in long dated options on EURTRY, it entails being long a Put on EURTRY striked at 7.18, right?
  • MC
    Matt C.
    19 June 2019 @ 20:03
    We put on a lot of the trades he discussed post crisis, been following his work for years; a true pro. Mike Green is a rock star as well... more please!
  • DS
    David S.
    19 June 2019 @ 17:47
    Any spending is catnip to a politician. Without compensating revenues all spending increases the deficits. On one side they will lower taxes and say it will boost government revenues to cover the new deficits - deficits rise. On the other side they will use MMT to increase spending in the economy and say it will boost government revenues to cover the new deficits - deficits rise. (I think both sides will end up using MMT to promote spending programs. How different is it really for QE?) Politicians that we elect can think of many more theories to justify increases in spending. Regardless, the US deficit is and will rise rapidly. Build your portfolio around an inflation model while watching out for the next recession. This is only stating the obvious. DLS
  • RC
    RJ C.
    19 June 2019 @ 16:28
    There is not even one time I have read Bassman's writing or heard his thoughts that I didn't learn something extraordinary.
  • SS
    S S.
    18 June 2019 @ 18:17
    Amazing interview. Thank you Gents! Michael Green is the Real Vision interviewer GOAT!
    • CJ
      Charles J.
      19 June 2019 @ 16:06
      Completely agree. He's able to add his own insights without overwhelming the interviewee. That's a delicate balance and he always nails it. I'd watch any video he's involved with.
  • lD
    lance D.
    19 June 2019 @ 15:12
    great interview- especially that last 10-15mins was just amazing and i guess separates the men from the boys with those sort of trades - dividend futures WTF hahaha
  • lD
    lance D.
    19 June 2019 @ 13:55
    Lovin the surname 'BASSMAN'
  • sb
    siddharth b.
    19 June 2019 @ 07:38
    MG is a sexy beast
  • DS
    David S.
    19 June 2019 @ 06:18
    What a pleasure. A+. Nuff said. DLS
  • SS
    Shanthi S.
    19 June 2019 @ 04:58
    Brilliant!! Thanks guys.
  • FB
    Floyd B.
    18 June 2019 @ 23:41
    Outstanding because it was educational and offered some practical ideas.
  • MK
    Michael K.
    18 June 2019 @ 23:05
    +1000 on unfiltered professional derivatives trader content. I appreciate we need a balance but as a 15 year market participant I often use the Softer RV content as a way to base competitors and to get to know personalities and narratives. This is straight up legit professional content today.
  • IO
    Igor O.
    18 June 2019 @ 17:26
    Would listen mr Bassman talking options all day long.
    • IO
      Igor O.
      18 June 2019 @ 17:30
      Can we have options trading class (advanced) on RV?
  • dm
    david m.
    18 June 2019 @ 16:49
    Came here to see MG.
  • MS
    Matthew S.
    18 June 2019 @ 15:06
    Michael Green is a great interviewer
  • PC
    Philip C.
    18 June 2019 @ 14:22
    The King of Convexity. Thank you MG and RV. Tell me you've got Chris Cole on next week. I know he was at conference!
  • JH
    Jesse H.
    18 June 2019 @ 13:12
    Fascinating and very well done - thanks, guys. The cumulative and sector-based buybacks chart is...insane. Wow. Didn't realise it was such a massive influence on stock market. Harley nailed so many things in this interview, in my opinion.
    • JH
      Jesse H.
      18 June 2019 @ 14:15
      One of the better interviews on RV I've seen in a terms of substance. Lots to think about here.
  • Bm
    Ben m.
    18 June 2019 @ 11:56
    Yep. What he said.
  • TH
    Timothy H.
    18 June 2019 @ 10:43
    Tvtvgvy yctvctvt On XCcmxmooyomb
  • JL
    J L.
    18 June 2019 @ 08:53
    cut rates to 50-100bp for the next 10 years (front only) and start financing fiscal spending asap, won't be pretty for creditors but might be in time to save us
  • PB
    Pieter B.
    18 June 2019 @ 06:59
    This was fantastic!