Insurrection Act invocation — 32-point gap between venues signals mispricing
L5 prices Trump Insurrection Act invocation at 17¢ with 912% IY, while L6 prices the same event at 49¢ — a 32-point cross-venue gap that is the single most actionable policy arb in the dataset. This gap almost certainly reflects different resolution criteria or time horizons, but at face value it implies either L5 is drastically underpriced or L6 is 2x fair value. With L3 (Taft-Hartley) at 28¢ as a calibration anchor for executive emergency powers, the base rate for Trump invoking statutory emergency authority sits around 25-30¢. Buy L5 at 17¢ and sell L6 at 49¢ as a pairs trade targeting convergence.
The Fed highlight confirms 78% probability of zero cuts year-end with a July hike priced at 23¢, while CPI regime data shows conflicting signals: R3 (CPI above 0.1% in June) flipped from taker to neutral at 7¢ suggesting a soft print, but R4 (core CPI above 0.3% in May) just flipped to taker. Congressional override and executive action markets offer high implied yield at tight spreads as the hawkish regime creates policy volatility. This is a contrarian theme — while consensus is 'no cuts,' we find mispriced tail risks in legislative and executive action markets.
CatalystDomestic unrest, immigration enforcement escalation, or border crisis triggering executive emergency declaration
RiskResolution criteria differ between L5 and L6 making the arb uncloseable; political environment de-escalates
WatchL5 rises above 30¢ or L6 falls below 30¢; spread compresses by at least 15 points · by 2026-09-20
sf ideas && sf book KXINSURRECTION-29-27