Hedge Funds Are Betting on the VIX Volatility Smile

Lucas and Luna break down why hedge funds are piling into VIX options and the volatility smile. With the VIX at 16.70 and the VVIX at 91.16, the gap between implied and realized vol is compressing. Funds are using tail-risk hedges and dispersion trades to capture convexity. Lucas explains the mechanics of the smile, how it shifted after 2020, and why Warsh's potential Fed regime change could reshape volatility markets. Luna brings in a real-world example of a fund that traded the smile during the 2025 tariff shock and walks away with a 22 percent return. They also touch on the risk that the smile flattens if the Fed intervenes in repo markets. A specific, data-rich episode for anyone following alternative risk premia. #VIX #VolatilitySmile #HedgeFunds #Options #TailRisk #VVIX #KevinWarsh #FederalReserve #DispersionTrading #Convexity #ImpliedVolatility #RealizedVolatility #RiskPremia #AlternativeInvestments #InstitutionalInvesting #Finance #BusinessPodcast #FexingoBusiness Keep every episode free: buymeacoffee.com/fexingo