Jamie Dimon Likes Straddles

James HughbanksProbability, Stock Market, VolatilityLeave a Comment

OK, maybe he doesn’t really “like” straddles. But what he does say implies that the market conditions going forward will have characteristics that are conducive to long straddles.

Dimon Sees Recent Volatility as Harbinger of Things to Come

A few of the reasons given include what we just wrote about a few days ago: declining liquidity.

A key nugget in the article is a quote from JPMorgan’s co-president Daniel Pinto:

“‘Flash crashes’ are becoming more frequent,” Pinto said. “These are a function of a number of factors, including thinner liquidity across asset classes, fewer participants in the market and a growing percentage of automated trading volumes.”

We agree. Which is why, even though we are currently bullish, we are also concerned about the fragile nature of the market where you have extreme volatility shocks in the middle of extended periods of low volatility.