The Trump premium is still in the casino, despite the risk premium at multi-decade lows. Why? Because sheeple have a well established tradition of buying first and asking no questions later.
Could be a rude awakening when they realize what they bought:
The asinine rationalizations over the crash in risk premia continues, as one would fully expect at such a perilous juncture...
In a nutshell, what S&P 500 implied volatility at 9.5 is telling us is that if the casino falls (or rises) less than 9.5% in the coming year, then on average hedges lose money. If however, the casino falls more than 9.5% at any point, then someone is going to shit a brick, because options are not priced for that scenario.
Here is some data mining right here:
Short-term movements in the casino have been extrapolated to infinity and priced as "low risk" by a backwards-looking options market...
Full disclosure: I am always long brick shitting volatility. Extrapolate insanity and otherwise gamble at your own risk.
But why is it the most expensive, that's the question...
"I think people are looking at the remnants of the Trump trade and saying, this is a pretty big failure, and therefore they're knocking out a decent portion of it," he said. "This represents a pretty big move back."
The Trump premium is still in the casino
The BOJ meets tonight (Thursday, Tokyo) to decide how much more funding it should receive...
