Extreme Complacency

There is an extremely high level of complacency across almost all markets such that pricing on tail-risk on the short-end (where we invest) is cheaper now than what it was at its cheapest in 2006 during Greenspan’s Great Moderation.  The result is that bleed risk for the strategy is minimal and at its lowest whilst upside potential is unprecedented (as detailed in our most recent monthly fund commentary).  The short-end of the implied volatility curve has been crushed as market participants have sold short-dated vol to buy vol just past the debt ceiling cliff.  The extreme cheapness of short-dated vol is markedly contrasted by rich medium- and long-term vol.

Source:  Zerohedge