Funds Find Opportunities in Volatility


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Minh Uong/The New York Times

Ozier Muhammad/The New York Times

Jason Adler, standing at desk, is a co-founder of the Alphabet Management, a hedge fund that looks for discrepancies in the prices of everything. T

Traders at Alphabet, in the company’s Manhattan office, say they are finding a lot of appealing bets. The last couple of years have been tough for many volatility funds, and industry insiders estimate that about 40 funds focus on volatility.

While other investors have been getting whipsawed by the roller-coaster action in global markets since the earthquake struck Japan a week ago, there are rich pickings these days for Mr. Adler, who runs a $275 million hedge fund that bets on volatility.

“Markets like these create opportunities,” said Mr. Adler, sitting in the spartan quarters of the firm he co-founded, Alphabet Management, just off Wall Street in Lower Manhattan.

Outside his office, eight traders were hunched over their desks, some eating bananas and others guzzling coffee. Their eyes flicked rapidly between multiple computer terminals that display headlines, securities data feeds and price charts.

Volatility funds like Alphabet look for small discrepancies in the prices of everything from stock market futures and options to equity indexes, jumping in when they think the market has misjudged the price.

And in markets like these where buy-and-sell decisions are more often driven by scary headlines or fear, traders at Alphabet say they are finding a lot of appealing bets.

“We’ve done well this week,” Mr. Adler said. He declined to give any specific data about his performance over the last few days. But Alphabet surged 26 percent last year and was up 4.4 percent for the year through the e

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