trading at all-time highs, it is possible to miss some of the less-obvious warning signs of danger ahead. has shown its willingness to course-correct and enact policies that extend the record economic expansion for as long as possible. And the rest of America is better off for it, from consumers who are keeping their purses open to public companies that just delivered stronger-than-expected earnings growth in the third quarter.
Several indicators in the derivatives market show that investors expect the good times to last. However, their positioning unearths two unsavory implications: complacency has gripped the market, and history suggests that volatility could suddenly rebound after a dull stretch. Both could lead to losses for traders who have wagered on higher prices., a hedge fund that specializes in volatility trading.
He added, "I'm used to some pressure my entire life, but there's no pressure in the market. Just skittishness; justHe told Business Insider that he sees a "bubble" in the selling of call and put options. This strategy is popular and profitable when the market is rising because it wagers on further gains. But it can also implode when volatility spikes — as it did last February whenCarney doesn't know when volatility will reverse its current trend.
This conclusion was based on a study of four volatility and options-market indicators. Here's the list, and what each means:Investors' bets in the options market that stocks will fall are far fewer than their bullish wagers. The 10-day moving average of the recently fell to its lowest level since last October. Besides signaling that bearish bets are scarce, a lower ratio could signal complacency.
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Source: BusinessInsider - 🏆 729. / 51 Read more »