A fascination with marketplaces and a knack for math is what pushed a young Paul Britton to explore the world of derivatives. However, it was his talent at chess that impressed a senior trader at his first interview with the London International Financial Futures Exchange. Paul was awarded the job, and while at LIFFE he discovered options—a type of derivative that would eventually become his specialty.

Paul Britton is the founder and CEO of Capstone, a $9 billion global alternative investment management firm that specializes in derivative-based strategies. The core of Paul and his team’s strategy is a deep understanding of volatility. While most investors would be wary of options and the surrounding complexities, Paul uses this complexity as an advantage to spread exposure across all asset types.

In this episode, Paul talks about the evolution of his derivative-based strategy, as well as Capstone’s origin. Adapting to a changing marketplace and constantly evaluating investment strategy is what Paul says has brought much of the firm’s success.

“I hope in five years’ time, I look back and critique the way I'm doing business today,” Paul explains, “That, to me, is the exciting part because Capstone is such an innovative place to work. We're always challenging the ways that we are thinking about investing, risk managing, [and] about the efficiencies in our processes.”

Many investors have previously viewed volatility as merely a defensive mechanism during times when the market was becoming more volatile. The emergence of volatility as an asset class is something more recent, as investors like Paul make a strong case that you can actually build a complete portfolio using only volatility and derivatives contracts.

Before founding Capstone, Paul began his career with Saratoga Limited, trading options on the London International Financial Futures and Options Exchange (LIFFE), and co-founded Mako Global Derivatives in 1999. Paul received a B.A. degree in European Business Finance from London Metropolitan University. Paul currently serves on the Boards of the US Soccer Foundation, The Tate America’s Foundation, and Friends Seminary School in New York City.