Monday, July 4, 2016

"Buy The Fucking Brexit" aka. MASS COMPLACENCY

Wall Street cover all hedges. Check...

The market's primary measure of fear has cratered, representing a dramatic turnabout in investors' emotional state.

The CBOE Volatility index plunged 42 percent in the prior trading week, its the biggest one-week drop in the history of the index that goes back to 1990.

"As soon as we figured out that things were OK, then immediately there was a rush to sell implied volatility."

"This is an instant Message to all of Wall Street: it's time to monetize all hedges..."

Selling volatility visualized
2x Volatility ETF short interest
5 dma:

According to a technical tool known as “Bollinger Bands,” the S&P 500 index has been as dead, and for as long, as it has been in 22 years. Basically, the market is like a coiled snake that is ready to strike...soon.

First article above:
"...something interesting happened last week. Even as actual volatility has increased, the amount of volatility implied by options prices has plunged"

Realized volatility (Bollinger Band width):

It's CasinoNomics. It's Not Personal
This "shock absorber" effect continues until all of the puts get monetized, which apparently takes 3 iterations, after which comes the "free fall" effect. But we've only seen that three times, so how would we know?