Financial market volatility is slumping across the board to historically - or dangerously - low levels, potentially fanning the flames for a repeat of February's "volmageddon" explosion that sparked a 10 per cent correction in US and world stocks.
Then, major bond and currency markets remained reasonably insulated from the turmoil that swept through equities. They may not be so lucky next time around, because positioning in some cases is even more extreme than it is in stocks.
A breakdown of how speculative investors like hedge funds are positioned across US futures markets shows that short VIX positions as a share of overall open interest are higher now than they were just before that record surge in February.
The net short position in 10-year US Treasuries as a share of total open interest is the highest since 2010 and close to a record high, while specs' net long dollar bet as a share of open interest is the highest since May last year.
Dollar positioning might not seem too extreme. But the currency has traded in such a narrow range this summer that its daily "standard deviation" is now the lowest this year, and closing in on historically low levels.
While global trade tensions are intensifying and some specific markets like Turkey's are experiencing acute problems, the overall calm descending on developed markets should come as little surprise.
There's been no big shock on the fiscal or monetary policy front, nor has there been an economic data bombshell that might herald a change of tack or policy U-turn at the Fed, ECB, BoE or BOJ. The Q2 earnings season has, on the whole, been much stronger than expected, too.
In short, investors have had little reason to change their broadly benign view of the world: solid corporate profit growth; strong and steady economic growth; low inflation; and higher but well telegraphed US interest rates.
The VIX index of implied volatility on the S&P 500 this week fell as low as 10.5 per cent and within sight of November's record low, and the Mermove index of implied vol in Treasuries is now also within sight of November's record low.
As February showed, betting on continually low and falling volatility is fine. Until it's not. Positioning is so one-sided on many of these trades that investors may soon face potentially large losses when markets turn.
The VIX index's dramatic surge in early February was short-lived but the rise on February 5, in nominal and percentage terms, was the biggest ever.
"Record short Treasuries, crowded short VIX, and long stocks positioning is a recipe for a big shock if something gives," warns Kenneth Broux, senior strategist at Societe Generale. "You could be looking at a sudden and sizeable fall in stocks and bond yields."
The fallout from February's volatility explosion, which was sparked by a sudden reversal in inverse VIX trades, has mostly been cleaned up. The Nasdaq hit a fresh record peak last month and the S&P 500 is now within 0.5 per cent of January's record high.
Speculators' short VIX futures position is now bigger than in the run-up to February's shakeout. Nominally, it's the biggest since October last year.
As a share of open interest, it's also the biggest since last autumn. But at 24.9 per cent, it's not far from being the biggest short position in many years (the record is 60 per cent in November 2008).
A major difference with February is positioning in bonds and the dollar. It is now much more stretched, particularly in 10-year Treasuries futures, which in nominal terms is a record net short.
It's a mirror image with the dollar, where speculators and hedge funds are heavily long. As a share of open interest the net long position stands at 53 per cent, the highest since May, although some way off the record 77 per cent seen in November 2005.
Steve Barrow at Standard Bank notes that the dollar has traded in a "pretty tiny" 1.5 per cent range over the last two months. Whether it breaks out to the upside or downside is immaterial, although positioning suggests it will be lower.
Either way, the elastic band is getting stretched. Fingers could get rapped when it snaps.