Goldman Trader: I Said “This Reminds Me Of 2008” More Times This Week Than I Can Remember

Goldman Trader: I Said “This Reminds Me Of 2008” More Times This Week Than I Can Remember

Over the weekend, we discussed that the probability of another sharp leg lower on Monday after Friday’s panicked reversal of Thursday’s furious gains is extremely low (in fact it’s likely that we will get yet another squeeze), if only due to technicals and positioning as hedge funds doubled-down on short aggressively into Friday’s dump while overall hedge fund net leverage fell to the lowest level since Mar ’20.

And if that isn’t enough, Sundial Capital’s Jason Goepfert pointed out something far more startling: “Last week, retail traders bought $19.9 billion worth of puts to open. They bought only $6.5 billion in calls to open. This is the first time in history that puts were 3x calls.“

I don’t think people really appreciate what’s happening in the options market right now.

Last week, retail traders bought $19.9 billion worth of puts to open. They bought only $6.5 billion in calls to open.

This is the first time in history that puts were 3x calls. pic.twitter.com/GR2apNfFtb

— Jason Goepfert (@jasongoepfert) October 16, 2022

Translation: the massive Delta hedge unwind that sent futures explosively higher on Thursday after the dismal CPI print is back even bigger than before, and just waiting for the signal to unwind the dealer delta hedge that will send futures soaring higher.

Still, as we discussed yesterday, while technicals point to a rollercoaster reversal on Monday as we get another overshorted, oversold rally on Monday and we may get a powerful bear market rally in November that pushes stocks to 4,000 or higher by year end, “the bear market won’t end until the Fed pivots. The

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