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10 points on positioning from Goldman Sachs head of volume trading

  1. Positioning feels like 4/10 long vs 9/10 in Jan.
  2. Institutions went from $210bn to 80bn in net length.
  3. We are not currently net short in terms of positioning so can’t say we are fully ‘clean’.
  4. Buybacks have been ramping up – we are 2x average of 2019. Entering blackouts soon so firms will have to use 10b5-1 programmes rather than managements discretion.
  5. Gross still elevated but Net down into 15 percentile. Gross exposure is still extremely high – short selling of fins is resulting in the space being the most underweight (7.7% vs MSCI World).
  6. Flows – Insurers adding protection and vol in size. Macro accounts trading from the short side. L/S, gross not been cut which could pose a liquidity risk if it does happen and they are staying in their favourite positions (HF VIP basket is holding up relatively well.
  7. Gamma is in play, market is short gamma (mkt closes at intraday low or high). Systematic sellers are largely gone – 1 month gamma is at 55vol, 1 day at 140 vol.
  8. Skew is currently at highest level ever.
  9. Think we see CTA demand 2900/3100 levels – these wont drive demand from here. See net selling to moderate (expect $50bn of 1 week sales). Higher vol results in longs and shorts coming down from vol control funds, forced selling at higher vol levels.
  10. S&P now trading as a short gamma instrument. Remain nimble. CBOE going fully electronic tomorrow for S&P options – think this will cause liquidity to drop. First day we will see floor shutting down impacting S&P option liquidity for the first time ever – OTC markets will be top of mind as clients prefer liquidity from this channel.

 Trader Georgi Bozhidarov


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