Am curious, are you suggesting any actionable trading strategy?
No, primarily I wanted to point out certain risk factors. The last sentence of my post was meant primarily as an illustration of the sentence before that.
d) sounds like you might be suggesting long vol, are you suggesting that?
Based on the risk factors stated above (but also based on the fact that overvaluations can be quite long lasting) I think most likely is one of two scenarios: A continued increase in the stock market based on the feeling of “there is no alternative” or a marked reduction of equity prices, so basically a bimodal distribution of expected returns.
Whether this is already priced in in the current option market I don’t know. (And since I don’t do short term trading I don’t really care that much.) Without a specific prediction for the distribution of the expected returns (which I am unable to give above the more qualitative statement in the previous paragraph) I think it isn’t possible to answer that.
No, primarily I wanted to point out certain risk factors. The last sentence of my post was meant primarily as an illustration of the sentence before that.
Based on the risk factors stated above (but also based on the fact that overvaluations can be quite long lasting) I think most likely is one of two scenarios: A continued increase in the stock market based on the feeling of “there is no alternative” or a marked reduction of equity prices, so basically a bimodal distribution of expected returns.
Whether this is already priced in in the current option market I don’t know. (And since I don’t do short term trading I don’t really care that much.) Without a specific prediction for the distribution of the expected returns (which I am unable to give above the more qualitative statement in the previous paragraph) I think it isn’t possible to answer that.