This has all happened before.
I am thinking of 1987, when portfolio insurance was very popular.
Portfolio insurance was a programmed scheme simultaneously trading in stocks in NY and their options in Chicago, that guaranteed that you couldn't lose money on your portfolio.
If nobody can theoretically lose money, then reality will enforce itself by violating an assumption.
In this case, in 1987, it was that it was suddenly no longer possible to execute simultaneous trades in NY and Chicago. There were no buyers. They didn't think of that.
Yet it was precisely a consequence of portfolio insurance that it happened.
So now everything is hedged and insured, and every hedge falls in value simultaneously.
If nobody can lose money, your assumptions are wrong, might be the rule to use.
You do yes have to look at what you're buying.
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