HYBRID VIGOR VOL 2 ISSUE 24: Even When Bearing Gifts

If there’s one group of traders that doesn’t fear the developments coming out of Greece, it’s probably those who try to make money being long volatility. That’s been a tough way to go for quite a few years now, but it would have been even tougher without the trading opportunities made available by this century’s version of the ancient Greek dramatics.

In honor of this week’s Greek anxieties, as well as my recent 30-year college reunion and the memories of the first freshman-year readings, I thought I’d imagine a world in which the ancient tragedians had not only power, jealousy and unbridled passion as themes but also the stuff that really makes the world go around—conversion premium.

Imagine Aeschylus’ Agamemnon with a twist. Agamemnon is a hedge-fund manager who safely navigates his portfolio through a tumultuous market, providing solid positive returns while many of his peers are losing money. But after a successful visit to a client, he returns home to find that his wife, Clytemnestra, has moved all her assets to a competing manager who promises to outperform Agamemnon in the next cycle.

Or consider Sophocles’ Oedipus Rex. On a long marketing trip, Oedipus encounters an old pension consultant who challenges Oedipus to prove that his alpha-generation system works in all markets. Oedipus takes offense and tells the consultant to go stick needles in his eyes, only to learn that the consultant had actually been responsible for Oedipus’ initial seed capital. Not the right guy to mess with.

Finally, think about an update of Euripides’ Bacchae. A leading convertible hedge-fund manager feels disrespected by an investor questioning his academic pedigree. He decides to liquidate his entire portfolio in a single day, throwing the entire market into chaos.

Who says convertibles are boring? Indeed, there are plenty of reasons to expect an eventful summer. We look forward to covering the excitement and sharing our HARP, HOCS and other opinions with you.

(This is the cover letter for the subscription-based weekly Hillside's Hybrid Vigor newsletter. For a complete copy, please contact John Anderson at + 1 (646) 712-9289 x 107).