GS Vol Views July 31

GS Vol Views – our new periodic update on flows, ideas, and content from our derivatives desk. Open to feedback so please let us know what might be most useful...

Overview: Desk activity levels remain high (8/10). Flows indicate any panic this week was limited, despite the painful price action. Our Vol Panic Index also returned to ~5.1/10 this morning (Chart). From here, the desk views the positioning reset and reduction of systemic leverage as conducive to a sustained grind higher, especially in Semis -- we recommend adding long delta, short vol structures to play for less parabolic upside. Looking ahead to next week, we'll get earnings from ~14% of S&P 500 market cap and July NFP. SPX implied move through next Friday is ~1.53%.

Micro: I) Early in the week our single stock vol flow emulated the aggressive de-grossing seen across our PB book, especially in the tech space.

II) That said, we also saw several clients accumulate meaningful positions playing for a short- term bounce in memory. - Ex: GS cust bought over 10k+ DRAM 31Jul 48 calls

III) As sentiment broadly turned more risk-on we saw interest for seemingly "forgotten trades" including Gold and Crypto upside. - Ex: GS cust bought 27.4k GLD Sep 400 425 call spreads

IV) We suggest using options to express earnings convictions given heightened scrutiny is leading to outsized moves (ex. MSFT vs META). - Next week brings PLTR, SPCX, AMD, LLY, SNDK, UBER among others -- reach out for the most attractive set-ups

V) Trade Idea -- SMH Upside -- increasing inbounds from LO and SMH sitting just above its 100dma leads us to believe that Semis is a clean place to reload. - We saw vol compress on yesterday's rally and expect this to continue ... we like ratio call spreads and knock-out calls here (Chart)