Goldman Sachs TMT trading desk says weekly implied US equity volatility is about
89bp, near a five-year low, with its panic reading at 0.36/10. The desk
estimates option market makers hold roughly $15bn of positive-gamma hedges, near
the 99th percentile, which biases dealers to sell into rallies and buy into dips
and thus mutes short-term moves. It also estimates 96% of S&P 500 firms are in
open repurchase windows and announced buyback authorizations exceed $1trln,
implying corporate repurchases could absorb selling in summer’s thin liquidity.
Macro risks remain—long-end yields are still rising and oil has resumed an
uptrend—but derivatives markets are pricing very low near-term volatility. If
dealer positive gamma and buybacks persist, US equity short-term volatility may
stay suppressed; if those supports weaken, the current ultra-low vol will
increase sensitivity to price re-expansion.
