Northbridge trades volatility in listed options and futures markets, and sizes every position against the conditions that would test it hardest.
We are a proprietary trading firm working in exchange-traded derivatives. Our positions express views on the pricing of volatility rather than on the direction of the underlying market, and the risk framework that governs those positions is set before capital is committed to them.
Our approach →Volatility
We model the implied volatility surface and its behavior over time, and take exposure where quoted levels diverge from what our own pricing supports. That work spans relative value between strikes and expiries, the relationship between realized and implied volatility, and the way skew and term structure reprice as conditions change.
Listed derivatives
Our activity is concentrated in exchange-traded options and futures across equity index, rates, and selected commodity markets. Trading cleared instruments keeps pricing observable and counterparty exposure contained, and it means a position can be reduced on our own timetable rather than on the willingness of a single dealer to quote.
Risk
Exposure limits, stress scenarios, and hedging requirements are defined at the point a strategy is approved, and they govern the book for as long as the position is held. We assume the distribution of outcomes has heavier tails than any model of it, and we accept the cost of carrying protection against those tails in periods when nothing appears to require it.
The engineering standard for a bridge is not the traffic it carries on an ordinary morning. It is the load it has to survive on the worst day anyone can reasonably anticipate, with a margin beyond that, because the anticipation is imperfect.
We hold the same view of a trading book. Returns in derivatives markets are earned by taking risk that other participants would rather not hold, and the question that matters is not what a position yields while conditions are ordinary. It is what remains of the firm when they are not.