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Trump Warned of a Depression, Here’s What the Options Actually Price
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ticker lesson
Breakdown
0:00lesson
Midterm elections and market performance
- Midterm year averages 4.6%
- Period following midterms averages 17.2%
- Market loves gridlock
- Gridlock yields better returns
2:18lesson
Options market and depression pricing
- Depression defined by 20% S&P 500 drop
- Current S&P 500 at 7,803
- 10% drop = 780 points
- Depression not priced in options
4:13lesson
Expected market moves and gridlock
- Expected move to January 2028 = 1,200 points
- Gridlock has been good for markets
- Market allows insurance for catastrophic events
- Break-even at 6,100 points
5:59lesson
VIX term structure and volatility
- VIX currently around 15
- October VIX contract at 1680
- Contango in VIX futures
- No expected volatility around midterms
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