McElligott: Someone Is Blowing Up In Vol

While Nomura's Charlie McElligott admits that at the end of every summer he intentionally puts a “block” on himself "from over-sending or creating white noise in such low participation markets, not wanting to spin wheels and over-interpret illiquid market moves (there’s a “But” coming)"... BUT what is going on right now is simply worth flagging, as his latest comments on both equity and rates vol tie into the risk of larger moves being amplified in the future.

In no uncertain terms, the Nomura x-asset strategist explains that the equity volatility collapse/capitulation has gone "epic" with yesterday’s trade looking like like some outright stop-outs  - take the IWM 3m ATM iVol which has collapsed to the 0.2% percentile. This market action suggests that options market makers and dealers are choking on huge PNL losses, as anybody or anything long Optionality / long Skew has been bled-out, and McElligott expects the possibility of some meaningful headlines in the next few days of major trading losses being crystalized.