US Default Chances Overblown? | Option & Bond Markets Not Showing Fear | Chat GPT AI Research…

Derek Moore and ZEGA Financial CEO Jay Pestrichelli discuss whether the option markets via Volatility Indexes are underrating potential market turmoil. Plus, they debate whether fears of the US defaulting on Treasury Bonds is Overrated? Using ChatGPT AI to research the 1979 US Treasury default. Then they talk through what they are seeing in the options market including variances between implied volatility between different places on the volatility surface. Finally, before some recommendations, they discuss calls for banning of short selling on regional banks and why its not a great idea.

Explaining implied volatility

What the current volatility levels across the volatility surfaces is saying about market worries

What the Bond volatility index is saying about markets

Is it too quiet in markets or rightly quiet and the options markets know best?

Are debt ceiling default fears overblown?

Wouldn’t the government prioritize interest on debt over other random expenses?

The treasury is still collecting tax revenue each week, so don’t they have money to pay debt?

ChatGPT AI research on the 1979 technical treasury bond default

Why did Treasury Bonds default in 1979?

CDS (Credit Default Swap) rates on US Treasuries

New talk on banning short selling on regional banks.

What function does short selling provide to markets?

Why banning short selling would cause option premiums to rise.

Mentioned in this Episode:

The Big Short Movie and Credit Default Swaps Explained

Article detailing prior U.S. Defaults

Margin Call Movie and Understanding Value at Risk

Dividend Deep Dive | ChatGPT AI Fed Research | Do Markets Go Up After Fed Pauses?

Jay Pestrichelli’s book Buy and Hedge

Derek’s new book on public speaking Effortless Public Speaking

Derek Moore’s book Broken Pie Chart

Contact Derek derek.moore@zegafinancial.com

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