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Goldman Trader: The Top Client Question This Week Was "Why Did The Market Not Go Down In The Face Of Incredibly Worsening Data"

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by Tyler Durden
Monday, Jul 18, 2022 - 03:00 AM

By Scott Rubner, Goldman Sachs flow trader and managing director

The number one incoming question this week “Why did the market not go down in the face of incredibly worsening macro and fundamental earnings data?”. “Any color on why we rallied late in the day both days to unchanged?” “if we can’t sell off into that CPI and “100 headlines” then.... good beat in the morning data into the weekend. Lets get going: #TFOF

1. Op-Ex: $2 Trillion worth of option notional expiried on Friday. $807 Billon expired on the opening AM print and $1.1 Trillion expired on the closing PM print. This is significant. The largest distribution of current options is within 1% of current spot. Our read has been the market has been effectively pinned at 3800 into the AM print as dealers re-hedge the delta and aggressively trading long gamma (to mute market moves lower). This dynamic expired Friday, and will trade more short gamma next week. The market can move more freely next week when it removes this long gamma dynamic of buying weakness.