BANK OF AMERICA: It's the best time in nearly 40 years to profit from a calm market - and these are the 2 best trades to take advantage

• Stocks, gold, and Treasurys are earning risk-adjusted returns that are among the highest investors have seen since 1982, according to Bank of America data.
• A team of strategists at the firm explain how traders can take advantage of this attractive environment without timing the top.
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If it feels like every asset under the sun is rallying while volatility is awfully low, your instincts are not wrong.

The year-to-date gains of major asset classes tell a good story despite the coronavirus outbreak. Returns from the S&P 500, 10-year Treasury note and the dollar are in excess of 4% for the year. Even gold, which typically falls when investors embrace risk, has climbed nearly 6% towards a seven-year high.

But these returns do not tell the full story of how unusual - in a good way - this market is. That's where Bank of America comes in, by looking into a measure of risk-adjusted returns known as Sharpe ratios. A higher ratio means investors are enjoying stronger returns relative to their risk-taking and the prevailing level of volatility.

A team of the bank's derivatives strategists computed that the average Sharpe ratios of the S&P 500, the dollar, and 10-year Treasury futures is 4.23, in the 98th percentile of their data that dates back to 1982.

"There simply has not been a bad long trade in broad US assets this year," they said in a note on Wednesday.

The strategists also found that gold, the asset with the lowest Sharpe ratio, is still delivering unusually strong risk-adjusted returns. At 3.13, the ratio was in the 99.5th percentile - low in nominal terms but at the highest level investors have seen since 1982.

It is no mystery why every asset is seemingly in rally mode. The strategists run through the list of catalysts that include dovish Federal Reserve policy and a domestic economy that is attracting capital flows from around the world. Safe-haven assets like gold and Treasuries are benefiting from these inflows, as well as investors' need to hedge against unforeseen risks.

As for what could go wrong and end the rally, the strategists flag a distinct market event such as the market growing more confident that Sen. Bernie Sanders will defeat President Donald Trump in the general election.

In the interim, they recommend using S&P 500 call options to profit from the market's gains without needing to time the top. The details of their two recommendations are relayed below:

1. For stocks and gold higher: S&P Jun 3400 calls contingent on GLD > 151 at expiry for 1.03% indic., ref. 3370f & 150.91 (~59% discount vs vanilla, -30 correl offer)
2. For stocks higher but bond yields lower: S&P Jun 3400 calls contingent on 10yr CMS (swap rate) < 1.5% at expiry for 1.11% indic., ref. 3370f & 1.494% fwd (~56% discount vs. vanilla, 37 correl bid)

Get the latest Bank of America stock price here.