The Options Market Has Flipped

The US equity market has seen a record-fast reversal in options sentiment, moving from deep negative gamma to extreme long positioning driven by AI earnings and capex growth. This shift has led to increased exposure in Asian tech supply chains and a tactical warming toward China.

Key Takeaways

• 1.Dealer gamma positioning has flipped from a near-record negative -$7.24bn in March to a high positive +$21.3bn in May.
• 2.Market sentiment has shifted from recession/geopolitical fears to a narrative of AI capex supercycle and growth re-acceleration.
• 3.Corporations are prioritizing AI-linked capex (+38% y/y) over share buybacks (+1% y/y), with hyperscalers driving the wave.

Table of Contents

• Options Market Reversal
• Fundamental Backdrop and Earnings
• Corporate Cash Deployment
• EM / Asia and the AI Story
• China Tactical Upside
• Fed and Macro Risks

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