Don’t trade index options without this chart
These strategies represent nearly $200b in AUM (up from $150b last year) and systematically hold positions on $310b notional in options (some hold multiple positions). Biggest selling pressure: Net call selling across 1m, 3m and 12m options is most notable at a combined $168b of AUM. Biggest buying Pressure: Net put buying across 3m and 12m options is next most notable at a combined $70b of AUM.

Funding spreads remain low vs last fall
This was the key metric that warned us that asset managers were selling late last year and helped us become more cautious ahead of the drawdown. Demand for length in the futures/swaps/options markets continues to be much weaker YTD than in 4Q24. We still view this chart as a negative signal, but given the gap has closed more than halfway between the market and this measure, this signal only suggests being half as bearish. Given the lack of movement of funding spreads we have shifted our focus to other positioning measures that tell us about retail investor and hedge fund positioning.

Hedge fund and retail investor activity in options has declined significantly
We believe this decline in options activity is likely to embolden investors that short stocks as lower options volumes mean a lower probability of short squeezes. While retail investors appear to be buying the dip in NDX stocks (see next chart), we believe the options activity is a more important indicator of positioning. Investors excitement about positioning for short term upside has clearly declined over the past couple weeks, likely due to fewer scheduled single stock catalysts in the next few weeks.

Retail investors continue to buy the dip in NDX and SPX names
We view it as a positive that retail investors are still willing to buy the dip in Tech names.

Factor volatility has increased, suggesting high volatility among fundamental hedge funds
Last week we demonstrated with similar data that factor volatility has been consistently higher than average stock volatility in the post-COVID era. Due in part to the extreme factor volatility of late February, factor volatility has increased recently. 1-month realized factor volatility of 15 is at its highest level in over two years.

SPX daily implied moves: Flat term structure
While there are a few standout days, the SPX volatility surface is remarkably flat over the next 7 weeks.

VVIX has declined faster than the VIX
Investors expect the VIX to be less volatile over the next month at its recently elevated level. Investors think “elevated volatility is here to stay”.

Single stock skew suggests balanced positioning vs the past few years
After a few weeks of increasing fear, we are now at multi-year average levels. This suggests neither crowded upside nor downside positioning.

Single stock liquidity has been pressured over the past week
This suggests single stock volatility has risen at a faster pace than single stock volumes, leading bid-ask spreads to be wider on large trades. Our cross- sectional studies of liquidity suggests that those stocks with low liquidity also tend to see higher subsequent volatility.

Call buying pressure for China stocks has declined
Following the recent rally in FXI, investors are less excited about buying calls for further upside asymmetry.

Equity options remain most elevated vs history; credit options have risen the most
For the first time in years, credit volatility is above its 14-year average and more elevated than rates volatility.

Oil options positioning is balanced
Investors are not disproportionately positioned for asymmetric upside or downside.

What does it mean that so many investors are short Treasury Futures?
While this positioning developed following the August global equity decline, positioning remains at historically extreme levels.
