Long Convexity, Long Chaos
Ramble Portfolio Review - April 2026
April was a bad month. Down roughly 3% on a ~16 vol book.
Back to flat on the year. Oof.
Not a disaster. But the reason matters.
The market priced resolution. I’m positioned for recovery amidst chaos. Those are not the same thing. This is why you take down risk when you feel like you are early, so you can save your bullets for when the world starts to price into your conviction.
Quick framing for anyone new. This is my alpha/convexity book, not my absolute return portfolio. As discussed in our last piece, the absolute return portfolio layers this on top of a beta portfolio that’s still under construction. The goal is to provide convexity on top of my diversified beta, with a lean-short bias given I have a lot of illiquid startup equity sitting off-balance-sheet. By summer I’ll tie the two together into something that looks more like a traditional investable portfolio. For now, think of this as half the book sitting against a good diversified set of “all beta.”
The Mistake
I got the macro right and the sequence wrong.
Oil shocks don’t hit all at once. They propagate. Energy to fertilizer to crops to CPI to rates. The market is still trading step one. I’m positioned across steps two through four. That timing mismatch cost me.
Here’s the honest part: as I try to trade at higher frequency and complexity (in part wanting to show process for you kind folks), I’m taking the kind of positions I used to take at Lehman where I would watch them all day. Instead I’m making mistakes in risk, ops, and implementation that account for about half of the drawdown. You could argue these are things that wouldn’t be an issue if I were doing this full time or had help. I hope that’s true, but I need to demonstrate it. Makes me think harder about the timeline to turn back to the Ramble and the portfolio full time. Automation is a sexy buzzword, but right now it’s costing me 10 hours for every hour I save.
The View
I don’t see a Venn diagram where the two sides meet. Trump seems to be getting comfortable either waiting Iran out and doing the rimland strangle (hoping eventually China forces them to the table) or waiting for the Iranians to trip another wire of escalation. The one thing that seems clear is that US stocks want to shrug it off. That was the wrong implementation of my view. Oil and the knock-on effects of Hormuz closing cannot shrug it off.
The US economy looks to be reflating, as do others, though it’s hard to disentangle the inflation component in oil-importing countries (UK for example). That led me to add some cable shorts and a bit of oil upside Sunday night. Given the size of my commods and duration exposure, I’m getting pretty exposed to higher rates and a strong dollar. Bought some cable puts defensively since it covers some dollar exposure and captures the tail of the UK losing control of their rates market, which would pull SONIA up but crush GBP.
The curve is pricing resolution. It’s not pricing recovery. If stocks continue to rip while Hormuz stays closed, eventually bonds will need to sell off as folks price in an inflationary risk on. This would in turn crush many of the hot AI plays which we had on in size before the war. Which is why we remain under allocated and paying theta.
The Book
We’ve taken VaR down to ~1% (around 16% expected annual volatility, down from ~40 in January) along with the increase in uncertainty. This understates our upside volatility though, as we have a lot of embedded convexity in the portfolio.
