Book Description
Cut risk and generate profit even after the market dropsThe Second Leg Down offers practical approaches to profiting after a market event. Written by a specialist in global macro, volatility and hedging overlay strategies, this book provides indepth insight into surviving in a volatile environment. Historical back tests and scenario diagrams illustrate a variety of strategies for offsetting portfolio risks with afterthefact options hedging, and the discussion explores how a mixture of trend following and contrarian futures strategies can be beneficial. Without a rational analysisbased approach, investors often find themselves having to cut risk and buy protection just as options are at their most overpriced. This book provides practical strategies, expert analysis and the knowledge base to assist you in recovering your portfolio.
Hedging strategies are often presented as expensive and unnecessary, especially during a bull market. When equity indices and other unstable assets drop, they find themselves stuck – hedging is now at its most expensive, but it is imperative to hedge or face liquidation. This book shows you how to salvage the situation, with strategies backed by expert analysis.
 Identify the right hedges during high volatility
 Generate attractive riskadjusted returns
 Learn new strategies for offsetting risk
 Know your options for when losses have already occurred
Imagine this scenario: you've incurred significant losses, you're approaching risk limits, you must cut risk immediately, yet slashing positions would damage the portfolio – what do you do? The Second Leg Down is your emergency hotline, with practical strategies for dire conditions.
Table of Contents
 Cover
 Title Page
 Copyright
 Dedication
 Preface
 Acknowledgements
 About the Author

Chapter 1: Introduction
 The Airplane Ticket Trade
 The Bull Cycle
 The Renegades
 Claws of the Bear
 Zugzwang
 The Sceptics
 A Sad Truth
 Common Mistakes
 Imprecise but Effective
 Hedging Against Implausible Scenarios
 A Black Swan in Correlation
 Taking Profits
 The Good, the Bad and the Ugly
 The Great Escape
 Having a Plan
 Trend Following as a Defensive Strategy
 Taking the Offensive
 The PreConditions for Market Crises
 Banks: The Great Multiplier
 A Change in Risk Regime
 Endnotes
 Chapter 2: “Safe” Havens and the Second Leg Down

Chapter 3: An Overview of Options Strategies
 The Building Blocks: Calls and Puts
 Why Buy a Call or Put?
 The Black–Scholes Equation and Implied Volatility
 The Implied Volatility Skew
 Hedging Small Moves
 Delta Hedging: The Idealised Case
 Practical Limits of Delta Hedging
 Hedging Options with Other Options
 Put and Call Spreads
 Straddles and Strangles
 The Deformable Sheet
 Skew Dynamics for Risky Assets
 The 1×2 Ratio Spread and Its Relatives
 The Batman Trade
 Implied Correlation and the Equity Index Skew
 From Ratios to Butterflies
 Calendar Spreads
 Summary

Chapter 4: Hedging the Wings
 Taking the Other Side of the 1×2
 Comparing the 25 and 10 Delta Puts
 Hedging Sovereign Bond Risk
 Selling Put Ratio Spreads on the S&P 500
 The Hypothetical Implied Distribution
 Our Findings So Far
 BackTests: A Cautionary Note
 A Short Digression: DeltaNeutral or Comfortably Balanced?
 The 665 Put
 Implications of the Square Root Strategy
 Futures vs Spot
 A Dramatic Example
 A CrossSectional Study
 The “New” VIX: ModelIndependent, Though Not Particularly Intuitive
 The Spot VIX: Oasis or Mirage?
 Migrating to VIX Options
 Reflections on Figure 4.36
 Migrating to Different Markets: The V2X
 RiskRegime Analysis
 Conditional Performance of Hedging Strategies
 Summary
 Chapter 5: The Long and the Short of It
 Chapter 6: Trend Following as a Portfolio Protection Strategy
 Chapter 7: Strategies for Taking Advantage of a Market Drop
 Chapter 8: “Flash Crashes”, Crises and the Limits of Prediction
 Glossary
 References
 Index
 End User License Agreement
Product Information
 Title: The Second Leg Down
 Author(s):
 Release date: April 2017
 Publisher(s): Wiley
 ISBN: 9781119219088