E189: Inside the Goldman Sachs Prop Desk: Lessons from a Top Trader w/Nancy Davis

Nancy Davis spent nearly a decade on Goldman Sachs’ legendary prop desk before founding Quadratic Capital, the firm behind the popular iVol ETF. In this episode, we dive deep into her options-based approach to investing, why she believes most investors manage risk backward, and how her firm is positioning for a potential return of stagflation. We also talk about her early days at Goldman, the psychological traps investors fall into, and why she thinks humility and coachability are underrated superpowers in finance. If you’ve ever wanted to understand volatility, inflation protection, or how to think like a derivatives trader—this episode is for you. Highlights: Starting her career on Goldman Sachs’ Risk Arbitrage desk in the 1990s Managing Goldman’s capital like a hedge fund—without client exposure Why she avoids stop losses and manages risk upfront using options “Debit card investing”: sizing positions by max loss instead of leverage Turning the traditional core-periphery portfolio model on its head How Quadratic makes options the core strategy, not a hedge Lessons from trading during the 2020 oil price shock and SVB crisis How the market is not pricing in inflation anymore—and why that matters The risks of a stagflationary regime and how iVol is built to respond What it really means to be coachable and the power of feedback Her most contrarian take on the market going into 2025 -- Guest Bio: Nancy Davis is the founder and managing partner of Quadratic Capital Management and the portfolio manager for the firm’s investment strategies, including the Quadratic Interest Rate Volatility and Inflation Hedge ETF (ticker: $IVOL). Before founding Quadratic in 2013, she spent nearly 10 years at Goldman Sachs, where she was a key member of the proprietary trading desk. Nancy has been recognized by Barron’s and other financial media as one of the leading experts on interest rate volatility, inflation hedging, and options-based portfolio strategies. Our Podcast now receives more than 300,000 downloads a month. Are you interested in sponsoring an episode? Please email David Weisburd at david@weisburdcapital.com . #VentureCapital #VC #Startups #OpenLP #AssetManagement -- Stay Connected: X / Twitter: David Weisburd: @dweisburd LinkedIn: David Weisburd: https://www.linkedin.com/in/dweisburd/ Nancy Davis: https://www.linkedin.com/in/nancyquadratic/ Links Quadratic Capital Management: https://www.ivoletf.com/ -- Questions or topics you want us to discuss on How I Invest? Email us at david@weisburdcapital.com . (0:00) Episode Preview (0:59) Differences in trading for internal partners vs. end clients (1:56) Anti stop-loss philosophy and risk management (4:24) Psychological aspects and significant trades in investing (8:41) Discussion on market inflation and lessons from Goldman Sachs (12:58) Importance of mentorship in finance (19:01) Contrarian market perspectives and stagflation explained (20:57) Closing remarks