Bloomberg Talks: Michael Purves (Podcast)

Bloomberg Talks episode (Mar 18, 2026) features Tallbacken Capital Advisors founder Michael Purves discussing continued tension and volatility in markets on Bloomberg Surveillance. Commentary signals heightened risk aversion and potential for increased short-term volatility, suggesting managers may want to reassess positioning and hedging strategies.

Analysis

Recent chatter about elevated market tension is translating into predictable derivatives mechanics: dealers short gamma force more selling on down moves, amplifying drawdowns in the first 3–10 trading days after a shock. That feedback loop means realized vol often overshoots implied vol on the downside, creating asymmetric intramonth downside risk even when macro fundamentals don’t change materially.

Flows matter more than headlines here. Retail and institutional demand for short-dated protection (VIX-linked ETFs, index puts) steepens the front end of the futures curve, producing heavy roll costs and contango that penalize buy-and-hold volatility plays but enrich sellers of short-dated premium. The mid- to long-end of the vol curve remains cheaper; that creates an actionable term-structure arbitrage window lasting weeks to months until positioning normalizes.

Second-order effects: margin calls and forced deleveraging in levered equity ETFs and systematic funds will catalyze cross-asset moves—USD and core rates often rally into equity shocks, compressing risk premia in credit and EM in 48–72 hour windows. Conversely, if dealer gamma is relieved (e.g., vol sellers/providers re-enter), we can see violent mean reversion within 1–2 weeks rather than a prolonged bear regime.

Key reversers are central-bank communication that removes policy-rate uncertainty, a surprisingly benign CPI/PCE print, or coordinated liquidity provision; each can flatten front-end vol term structure quickly and punish outright long short-dated vol positions. Tail scenarios (geo-political or systemic liquidity stress) would bypass these dynamics and push realized vol well above implied across the curve for months.

Key Decisions for Investors

• Buy short-dated VXX call spreads (ticker VXX) sized 0.25–0.5% NAV with 1–2 month expiries (e.g., buy 1-month 25–40 call spread). R/R: limited loss = premium, target 3x payoff if VIX futures spike >40; exit on term-structure flattening or VXX rally >60% intraday.
• Implement a put-calendar on SPY: sell 2–3 week 1% OTM puts and buy 3–4 month 1% OTM puts (ticker SPY options), size 0.5–1% NAV. R/R: collect short-dated theta while retaining crash protection; unwind when realized vol outperforms implied for 10 consecutive trading days.
• Systematic premium capture in liquid single-name options (AAPL, MSFT): sell 7–21 day 10–25 delta puts/call skew (size per-name 0.1–0.2% NAV) and fund with 2–3 month 2–3% OTM protective puts. R/R: expected 1–2% monthly carry with capped tail via long-dated protection; pause if IV spikes >60% vs 30d realized.
• Hedge macro tail risk with a small outright index tail purchase: buy 3–6 month 2–3% OTM SPX puts (via index options) sized 0.5% NAV to protect against sustained regime change. R/R: expensive insurance but limits fund-level drawdown in a scenario where dealer gamma and liquidity feedback loops persist for months.