Institutional Insights - Goldman Sachs VIX Views
According to Goldman Sachs last week the 'the US volatility market flinched … its up to trading desks to decide if this was an overshoot
1/ gs has an index which monitors 4 different aspects of “vol stress” … it hit a ~2 year high last night
2/ gs has a calculation which monitors the modeled 1 day move in VIX relative to the realized move in VIX … that ratio hit was ~2y high on Wednesday
3/ gs has a calculation for SPX street modelled gamma positioning … that hit a year to date low this morning
4/ gs vol desk frequently monitors cash vs option volumes … option volumes are trading all time highs (~52mm contracts per day for the last two weeks) vs cash volumes muted. Next week is arguably the busiest week of the summer … massive macro events (JOLTs, BOJ, Euro CPI, US ECI, FOMC, BOE, NFP) coupled with massive earnings announcements (40% of SPX market cap next week) … the cost of the 1 week straddle has more than doubled from ~0.9% start of July to almost 2% today hedging toolkit for those inclined ... "hedging late summer risk" for those inclined … from the cross asset seat, i would argue hedge budget could be better served in the credit market, as this “flinch” is currently and equity-only phenomenon.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!