"This is the new permanent plateau, featuring maximum risk taking and minimum volatility"
The reason they don't think a crash can happen is because they're not prepared for it. Quite the opposite, deja vu of 1987's disastrous "portfolio insurance", record volatility shorts make it far more likely to happen. Always talking their own book, always...
Last night, Hong Kong crashed -1.9% into the close, and per my hypothesis, China Tech got monkey hammered sending the S&P futures down -15 points overnight. No fear, the volatility compression team got straight to work, however, the more they compress the volatility futures, the more likely they blow themselves up.
Realized volatility is record low, but starting to rise. Any further (overnight) selling will ultimately feed through to the VIX:
The BTFD team got right to work this morning, but they have their work cut out for them...
In the meantime, the volatility sellers are compressing vol futures which is pushing the volatility curve towards self-imploding backwardation. As we see from VIX ETF volume, the volatility complex will force unwind in backwardation. For the first time in two years...
Once again, they're selling fire insurance in a fire assuming that the conflagaration doesn't get out of control:
As long as there is no more overnight selling, this will all be fine...
Otherwise, prepare for island reversal of fortune aka. MEGA CRASH
Margin of error is nil:
