For weeks now we’ve been watching a pantomime over the Strait of Hormuz. Is it open? Is it closed? It’s more Schrödinger’s Strait than it is anything else, i.e. both at the same time.
The ambiguity is the point of the exercise. You can’t write headlines, move oil markets, and maintain cognitive dissonance of those who hate Donald Trump if the Strait is either one state or the other, open or closed.
So, while this ambiguity has strategic value, that value has a time decay function, like an options contract. There are specific strike dates in the future that will rapidly decay the value of the option.
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The time function for valuing options is also very muchnot linear. It’s zero for a long time and then in the last thirty days of the contract the time function becomes more prominent until the value of the contract is essentially zero based on how far from the strike price we’re trading.
The farther from the strike price the more aggressive the time decay function is on the value of your option. (Hint: don’t trade options, most people are really bad at it, including me).
The same basic premise applies to political crises. Both sides lay out their strategy, deploy their propaganda teams, make their case before the public, maneuver their physical assets, apply behind-the-scenes leverage and then see who wins.
But eventually, that bill has to come for a vote, the other side takes their negotiators and goes home, or a blockade forces one side to begin dumping oil on the ground rather than shut in their production.
In the case of Iran v. Trump we’ve watched all three of these things consecutively and concurrently.
So, now let’s talk about Iran’s Schrödinger’s Strait strategy. Because, it isn’t Donald Trump who needs the strait in an ambiguouseigenstate.It is Iran. It’s all they have. Trump can use the ambiguity to his advantage, but he doesn’t need it.
Source: SGT Report
