Faheem Osman – Commodity QIS: An Under-Appreciated Source of Systematic Returns? (S7E29)

In this episode I speak with Faheem Osman, Managing Director and Global Head of QIS Structuring at Macquarie Group. Faheem has spent nearly two decades inside major investment banks — first at Citi, where he spent about ten years on the commodities trading and structuring side, and now at Macquarie, where he's built out their cross-asset QIS business. Commodities, though, remain firmly in the DNA of what Macquarie does, and it's where Faheem cuts his teeth. We spend the bulk of our conversation exploring commodity QIS as a distinct and, in Faheem's view, underappreciated source of systematic returns. Faheem walks us through strategies like curve carry and index congestion, explains why commodities have historically delivered some of the highest risk-adjusted returns of any asset class in QIS, and makes the case for why these premiums haven't simply been arbitraged away. We also dig into commodity volatility selling, the shift toward weekly options, and close with a timely discussion on what the explosion of 0DTE options means for the vol risk premium more broadly. Please enjoy my conversation with Faheem Osman. 00:00:00 Introduction, disclaimer, and guest introduction: Faheem Osman 00:01:19 Exploring and structuring commodity QIS across assets 00:05:44 Evolution of QIS and shifts in client demands 00:11:18 Case for commodities in systematic investment strategies 00:15:25 Depth and breadth of commodity market coverage 00:18:13 Drivers of high risk-adjusted returns in commodities 00:21:08 Factor taxonomy and classification in commodities 00:23:35 Enhancing commodity index exposure with QIS 00:26:26 Curve carry strategies for commodity index enhancement 00:32:08 Real-time impacts of oil volatility on curve carry 00:38:20 Commodity QIS strategy: Index congestion 00:44:06 Refinement vs. overfitting in QIS strategies 00:47:27 Volatility risk premium in commodities 00:51:02 Natural buyers and sellers in commodity options markets 00:53:18 Shift from monthly to weekly options in commodities 00:57:20 Customization demand in options strategies 00:59:34 Zero DTE options and their rise in equity markets 01:03:59 Opportunities in short-dated strategies 01:04:26 Faheem Osman's health and fitness interests 01:06:19 Closing remarks and thank you

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