Avoid Buying Put Insurance When You are Most Afraid by Wesley R. Gray, Ph.D., Alpha Architect, Author Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors. A timely piece on S&P 500 put option prices. The authors find that S&P 500 put options get too expensive during wild times because of 2 effects: Demand for insurance sky rockets (investor utility demands safety) Supply for insurance becomes restricted (credit constraints cripple market makers) The lesson seems to be straight forward: buy insurance when you don’t “feel” like you need it; avoid buying insurance when you “feel” like you... More