Resolve Riffs Investment Podcast · ReSolve Asset Management

Convexity Maven Harley Bassman: How To Survive The Next Rate Cycle

·1 hr 2 min·4 clips

Bassman says he bought a seven-year option on the 30-year Treasury and the ETF ran from 37 to 114.

1. Resolve Riffs Investment Podcast features Harley Bassman discussing the MOVE index and a recent rate-cycle trade. 2. Adam Butler hosts Bassman, who is described as a convexity maven, a managing partner at Simplify ETFs, and the inventor of MOVE. 3. The episode asks how investors can survive the next rate cycle without relying on short-term trading. 4. Bassman says MOVE was inspired by the VIX, which he saw in 1994 while running bond options at Merrill Lynch. 5. He defines MOVE as one-month implied volatility on the 2-year, 5-year, 10-year, and 30-year Treasury, weighted 20/20/40/20. 6. He warns that one-month options can jump around payroll dates and other calendar effects. 7. Bassman says option trading is a way to convert capital gains into income and back again. 8. He compares delta to velocity and gamma to acceleration, saying derivatives are “the physics of money.” 9. He says his desks hired physics PhDs in the 1990s because the math was really statistics and physics. 10. He describes a seven-year option on the 30-year Treasury that he packaged into an ETF. 11. He says that trade rose from 37 to 114 when the Fed started hiking rates. 12. He credits an SEC rule change that allowed options, futures, swaps, and similar exposures inside ETFs. 13. Bassman argues that leverage can be embedded in an option structure without a margin call. 14. He says the front end of the curve is mostly about the Fed, while the back end is more market-controlled. 15. He argues that the important market problem is not simple surprise, but the Fed’s inflection point and the yield curve’s turn. 16. He says the best historical recession signal is the 3-month to 10-year Treasury curve, not swaps. 17. Bassman says passive flows matter because millennials keep putting money into 401(k)s and equity funds. 18. He argues that unemployment above 5% would interrupt those passive flows and pressure value and valuations. 19. The conversation stays conversational and technical, with frequent back-and-forth on rates, inflation, AI, and portfolio design. 20. Listeners who like macro rates, convexity, and ETF structure will get the most value, while listeners wanting light banter or short answers may skip it.

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