Hedging The Coming US Debtapalooza

Hedging The Coming US Debtapalooza

MRDebt

Zero Hedge – One of the largest potential volatility events for the equity markets this year will be the Q1 US Debtapalooza.  There are three main issues that are to be debated with a crescendo coming in late February – the Long Term Budget Deal, the 2013 Budget Deal and the Debt Limit.  There will obviously be many consequential threats and theatrics associated with these events – including potential threats for government shutdowns and debt defaults – while the very real consequences could be additional US ratings downgrades.  It is important to remember that outside of the 2008 shock, the Debt Ceiling Debate and consequent US Debt Downgrade in Summer 2011 created the biggest volatility event of the past two decades.

 

Volatility metrics show that the market is extremely complacent heading into these events.   Equity volatility and skew are trading near multi-year lows (5th percentile or less over past two years), while many market indices are making new multi-year highs.  From a positioning standpoint, net exposures are higher than any time in 2012 while hedges are at multi-year lows.  Total SPX Put Open Interest has fallen from 9.5mm contracts to 5.7mm contracts in the past month – This is the lowest level of puts outstanding for the S&P500 since June 2009.  The bottom-line is that we are heading into a potential multiple-standard deviation volatility event with the price of options at their lows and market exposures/equity prices at their highs.

More

 

Get Free Email Updates!

Signup Now to Receive Updates and Alerts!

We will never give away, trade or sell your email address. You can unsubscribe at any time.

@https://twitter.com/candicelanier

Candice writes for several publications, including The Christian Post, Red State, The Black Sphere and Patriot Update. She is the Science & Tech Editor at the Minority Report Blog and the founder and Editor-in-Chief at Front Lines. She's also the founder of Candice Lanier's Tech News and works as a computer consultant. Additionally, Candice is an antiques dealer.

More in

15-0420 Media Bias

CBS News Breaks Out Their Monica Lewinsky Knee Pads for Obama

Michael BeckerApr 20, 2015
15-0420 Hillary Lies

Hillary is Elizabeth Warren in Drag!

Michael BeckerApr 20, 2015
Hassan Rouhani

We Don’t Need Republicans to Stop the “Deal” With Iran – We’ve Got the Iranians

Michael BeckerApr 20, 2015
Gas Drilling Western Politics

Why Everything The Media Tells You About Fracking Is Wrong…

Michael BeckerApr 19, 2015
15-0417 Racism

Crew of Black Home Invaders Holds Family at Gun Point. Judge Finds Family Guilty of Racism!

Michael BeckerApr 19, 2015
15-0419 Government Theft

Shocking Declaration By Obama And World Leaders: Your Bank Account Isn’t Yours

Michael BeckerApr 19, 2015

The Minority Report is a network of websites devoted to Conservative & Libertarian politics in the United States. In 2014 the network had over 20 million page views!

On this site you'll find posts & links to some of the best and most comprehensive center-right news and opinion on the net...

February 2013
M T W T F S S
« Jan   Mar »
 123
45678910
11121314151617
18192021222324
25262728  

Archives

Copyright © 2014 The Minority Report Network