It's quiet. Too quiet. Time to buy puts.

I know, I normally quote "never sell a quiet market" but this may be too quiet.

Up until now I have been happy to run with the theme that the market is in denial of an up move and price would grind out the bears. As such indeed bad news has been ignored, or rather it has tried to be traded but the response of the market is to keep on its steady course which created the behavioural learning feedback loop of desensitising further bad news. So in effect bears have been ground down and have been emotionally stopped out though prices are pretty unchanged over the past couple of months.

So with markets desensitised and beginning to think that bad news isn't bad because the markets haven't dumped, our risk is that instead of an 'unknown unknown' coming and kicking the markets lower, we are perhaps much more likely to have a 'glaringly obvious, but previously discounted, known' coming back and kicking us in the teeth. Which will be a real double whammy to market psyche as there is perhaps little worse than trying to justify to you superiors why you missed the bleeding obvious. So what will it be?

Well Ukraine has not gone away and is getting worse. The West is threatening to use it's economic deterrent of sanctions that has become their weapon of choice over armies and nukes presumably egged on by their successful implementation over Iran. But will they really be the stick to hit a Russian president who appears to be playing a short decisive game rather than one of longer term siege ( as with Iran) where sanctions have a greater impact. Much like a threat of "I'm going to fine you $10 per week for a long time rather than fine you $1m up front" doesn't have much impact if you are expecting the issue to have been resolved to your benefit within the month.

There is a nagging fear I have that something may well happen this week. Why now? Well Putin is busy playing a shorter game and playing the national hero. If you are playing on past glories then what better day to re-brand in the Russian populace's mind as a day of glory than May Day. So though it is currently camouflaged as Gazprom price rise day, it may involve something else.

If we add that fear to normal May resolutions, a ridiculously low Vol that is beginning to look like low vol complacency (see above), and a NZD that may be showing signals of a general risk off as it has started to move down on nothing, then this punter has decided to load the boat with a ladder of puts in DM equity indices out to 1 month and has even put on some eur/usd one month 1.3600 puts where vol, as Macro Man points out, is at basement levels. But if nothing has become clearer by this time next week will be looking to lift them all.