Unrelenting Risk Bid and Investor Capitulation

Investors are capitulating into a rising market as the S&P 500 hits record highs, shifting from macro short-covering to aggressive long positioning in AI and call options.

Key Takeaways

• 1.Underexposed investors are being forced to 'capitulate' into the market as the S&P 500 reaches consecutive all-time highs.
• 2.The market has transitioned from macro ETF short-covering to aggressive single-stock long demand, particularly in AI infrastructure.
• 3.Derivative activity reached historic levels, with record SPX call option volume and a build-up in year-end calls.

Table of Contents

• 1/ Prime Book (i) ... Flows risk on
• 2/ Prime Book (ii) ... Long-Short risk on
• 3/ One Delta ...'Stop Ins' risk on
• 4/ Futures ... Funding Spreads risk on
• 5/ Derivs (i) ... Skew risk on
• 6/ Derivs (ii) ... correlation risk on
• 7/ derivs (iii) ... Calls to the moon
• 8/ derivs (iv) ... Vol too cheap
• 9/ ETFs ... Risk on flows and DRAM
• 10/ Baskets ... Momo & Bottlenecks

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