Seat Belts Create Accidents - The Placement Effect and the Illusion of Risk Reduction

Seat belts save lives—but they also change behavior. In this episode, Bill Johnson extends the idea of risk migration into what economists call the placement effect: when perceived safety increases, people subconsciously take more risk. Using real-world examples—from mandatory seat belts to stop orders, long options, and selling far out-of-the-money puts—Bill explains why tools designed to reduce risk often encourage larger position sizes, greater leverage, and hidden exposure. Risk doesn't disappear when trades look safer. It gets repackaged, concentrated, or deferred. You'll learn why: "Low-risk" option strategies often store catastrophic risk Stop orders can increase losses by encouraging larger positions Long options feel safer but concentrate losses at a single price Calm markets invite leverage and make future volatility more dangerous This episode reframes risk as a feature of the future—not the trade—and shows why professional traders focus less on what risk they're avoiding and more on which risk they're holding.