Something is not right..

F

frostengine

By most measures, it appears we are about to enter one of the most "uncertain" times in recent memory. Yet VIX/Option Premiums are near multi year lows...

Everyday we have a new tweet about a tariff (at some point the market needs to take this seriously). Plus we have major instability in Europe brewing...

One tweet could cause a massive world wide panic sending the markets plunging... seems the next 4-8 years I would expect volatility/option premium to be high, but the market hasn't caught up.. what am I overlooking?

Don't get me wrong, I am fine with the low prices, I think being a buyer of options right now might be a great play as you look 3 to 6 months out. Especially buying ratio straddles (3 long straddles 6 months out short 2 straddle/strangles 2 to 3 weeks out) to finance the long straddles.. Just trying to figure out what I am missing..
 
frostengine said:
By most measures, it appears we are about to enter one of the most "uncertain" times in recent memory. Yet VIX/Option Premiums are near multi year lows...

Everyday we have a new tweet about a tariff (at some point the market needs to take this seriously). Plus we have major instability in Europe brewing...

One tweet could cause a massive world wide panic sending the markets plunging... seems the next 4-8 years I would expect volatility/option premium to be high, but the market hasn't caught up.. what am I overlooking?

Don't get me wrong, I am fine with the low prices, I think being a buyer of options right now might be a great play as you look 3 to 6 months out. Especially buying ratio straddles (3 long straddles 6 months out short 2 straddle/strangles 2 to 3 weeks out) to finance the long straddles.. Just trying to figure out what I am missing..
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Whether something is "right" or not is decided by the market. The consensus, according to VIX/options pricing, is that we're far from an uncertain time market-wise.

- What if the market sees tariff as a positive point ?
- Crisis in Europe means more asset in the US, doesn't it ? European pensions need to find a yield somewhere...

Those are not my opinions, just saying there's always different ways to look at stuff and when the "market doesn't get it" it just means you don't agree with the consensus, not that everyone is an idiot.
 
frostengine said:
By most measures, it appears we are about to enter one of the most "uncertain" times in recent memory. Yet VIX/Option Premiums are near multi year lows...

Everyday we have a new tweet about a tariff (at some point the market needs to take this seriously). Plus we have major instability in Europe brewing...

One tweet could cause a massive world wide panic sending the markets plunging... seems the next 4-8 years I would expect volatility/option premium to be high, but the market hasn't caught up.. what am I overlooking?

Don't get me wrong, I am fine with the low prices, I think being a buyer of options right now might be a great play as you look 3 to 6 months out. Especially buying ratio straddles (3 long straddles 6 months out short 2 straddle/strangles 2 to 3 weeks out) to finance the long straddles.. Just trying to figure out what I am missing..
More...
Well timing is difficult but overall the majority gets it wrong most of the time.
 
frostengine said:
Don't get me wrong, I am fine with the low prices, I think being a buyer of options right now might be a great play as you look 3 to 6 months out. Especially buying ratio straddles (3 long straddles 6 months out short 2 straddle/strangles 2 to 3 weeks out) to finance the long straddles.. Just trying to figure out what I am missing..
More...
The strangles you are selling would be very cheap based on current vol pricing. Have you modeled this trade with a vol pop where the weighted vega blows your shorts up a lot higher than the longs? Your net longs may not compensate you enough to overcome what your shorts will cost to buy back.
 
What's uncertain really? Certain market segments might experience uncertainty (pharmaceuticals), but this is true regardless of Trump. For all his rhetoric, Trump is at most mildly protectionist, more about 'fair' trade (vs. other nation's subsidized industries, etc).
 
pyradius said:
What's uncertain really? Certain market segments might experience uncertainty (pharmaceuticals), but this is true regardless of Trump. For all his rhetoric, Trump is at most mildly protectionist, more about 'fair' trade (vs. other nation's subsidized industries, etc).
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The uncertainty comes from him being somewhat of a lose cannon. A single tweet could start an international conflict. He could actually impose tarifs at the border which could quickly escalate into a major trade war. While those events are somewhat low probability, I just feel the market is not giving enough weight to the potential of those events taking place. Vix at multi year lows is strange when things could go sideways very quickly.
 
From transition team last year: "Trump has also promised to pull out of the Trans-Pacific Partnership, a centerpiece of President Obama’s trade agenda, on his first day in office. That agreement with 11 other counties, the largest in history, covers 40 percent of global GDP but has yet to be approved by Congress.

Scaramucci said the United States has in the past sought trade deals that made it easier for foreign partners to export goods to the U.S., rather than making it easier for U.S. manufacturers to penetrate foreign markets.

He added that the deals signed since World War II were designed to promote global peace and stability, but sometimes came at the expense of American workers."

http://thehill.com/business-a-lobby...ansition-official-trump-will-not-rip-up-nafta

Sounds precisely like 'fair trade' vs. massive protectionism. The opportunity to make money should trump any errant 'tweet' imo.
 
frostengine said:
The uncertainty comes from him being somewhat of a lose cannon. A single tweet could start an international conflict. He could actually impose tarifs at the border which could quickly escalate into a major trade war. While those events are somewhat low probability, I just feel the market is not giving enough weight to the potential of those events taking place. Vix at multi year lows is strange when things could go sideways very quickly.
More...

You know Trump personally ? I don't. So unless you do, your opinion is just formed from the Media which is garbage... or Books which is also garbage when it comes to making an unbiased view.

Now you're going to say he said stuff that he's not doing and he does stuff that he didn't say... so... like every politician ever ?

I have no political preferences, but I've heard people giving valid reasons for the market to crash since 2010, each time with plenty of compelling reasons as to why "now is the time".
 
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