The Second Leg Down

Cut risk and generate profit even after the market drops

The 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 in-depth insight into surviving in a volatile environment. Historical back tests and scenario diagrams illustrate a variety of strategies for offsetting portfolio risks with after-the-fact options hedging, and the discussion explores how a mixture of trend following and contrarian futures strategies can be beneficial. Without a rational analysis-based approach, investors often find themselves having to cut risk and buy protection just as options are at their most over-priced. 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 risk-adjusted 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.

HARI P. KRISHNAN, PHD, is a fund manager at Cross-Border Capital, where he runs systematic macro and volatility strat-egies. Cross-Border is a London-based hedge fund with roughly US$300 million in assets. He previously managed a CTA for a London-based asset management bou-tique, and he was an executive director and co-head of alternative asset allocation at Morgan Stanley (Chicago and London). In addition, Dr. Krishnan has worked as an options trading strategist and as a senior economist at the Chicago Board of Trade. He received a PhD in applied math from Brown University, and he was a post-doctoral research scientist at the Columbia Earth In-stitute, Columbia University, before moving into finance.

Imagine this scenario: you've incurred significant losses, you're approaching risk limits, and you must do something in order to curtail your losses immediately. Slashing po-sitions is either impossible or would destroy the integrity of your portfolio - what can you do? Don't panic: The Second Leg Down is your emer-gency hotline. It offers you proven strategies for surviving and thriving under precisely such dire conditions. Hedging strategies are often perceived as not merely expensive but unnecessary, especially during a bull market. But when equity indices and other unstable assets drop suddenly, in-vestors can find themselves mired and sinking fast- exactly when hedging is at its most expen-sive, but when it's imperative to hedge or face further material losses or even liquidation. The Second Leg Down: Strategies for Profiting after a Market Sell-Off shows you how to save the day with proven strategies for cutting risk and maximising profits, even in the most extreme market environments.

Praise for The Second Leg Down "The most difficult portfolio management decisions come after an unexpectedly large loss in an unsettled market. This book tackles that situation with a comprehensive, accurate and clear account of clever strategies to navigate the troubled waters with little or no sacrifice of upside. It's well-written and entertaining. Most of the time you're better off with the unclever idea of cutting positions to where you're comfortable for the risk, but if you refuse to do that, this book gives you the best chance of profiting from your aggressiveness." Aaron Brown, Chief Risk Officer, AQR Capital Management "Investors can be fickle, only allocating to a given strategy after a stretch of strong performance. Trend following is a classic example: it is an all-weather strategy that deserves a permanent place in a well-diversified portfolio. Reality suggests that investors only want to add defensive strategies when their core (read long beta) investments are failing them. Hari P. Krishnan has written a book that accounts for investor behavior, while providing the best possible solutions when your back is against the wall. This book is essential reading as a survival kit against disaster in your portfolio." Niels Kaastrup Larsen, Managing Director, DUNN Capital; Founder, Top Traders Unplugged Podcast "Hari Krishnan is one of the most practical thinkers in this business. He has forgotten what I am still trying to learn! His combination of practical real-world trading experience with theoretical know-how should lead the reader down secret pathways of knowledge few have the privilege to glimpse at, nevermind have illuminated and marked out." Jerry Haworth, CEO, 36 South Capital Advisors "How do you survive market crises and moves as sharp as those created by the Brexit and the US election? Predicting outcomes can be an exercise in futility, as these very recent examples have shown us. By tapping into his wealth of knowledge and experience as a fund manager during the 2008 crisis, flash crashes, crises in Europe, and many other market storms, Hari shows us how to weather these events so our portfolios can come out of the other side, intact, and maybe even having made some money in the process! Not only is the book very informative, but a great read as well!" Marc Malek, Managing Partner, Conquest Capital Group

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