New Option Volatility Fund Offered - Quantum Physics To The Rescue?

David Ko, a quantum physicist who was formally with Long-Term Capital Management, has a new hedge fund out of London focused on profiting from volatile markets (see WSJ article). The fund, called Kurtosis Capital Partners is in partnership with Stephen Cain, a former global head of currency trading at Deutsche Asset Management. The global macro fund hopes to initially raise between $100 to $250 million. As quoted by Cain, "Our strategy is to buy options when we think a market is going to become volatile. The closer to the dislocation, the better. Then, at the moment of highest volatility, sell." Buy low and sell high. Sounds like a good strategy to me. Certainly not complicated on the surface, but it would be interesting to see what types of models they are coming up with to forecast volatility, especially if Ko plans to use his background in quantum physics. Something tells me it is a little more complicated than GARCH. Cain also mentions that the fund will not use leverage, but will limit risk to the option purchase price. Another good lesson, and one learned the hard way at LTCM.