Goldman Sachs: Investors Rush to Build Upside Exposure as SPX Call Options Hit Record-High Volume
Miles Bennett
SPX call-option volume topped 4 million contracts yesterday — the highest on record; Goldman says the rush to rebuild upside exposure after July's epic tech deleveraging marks the start of a positioning catch-up window.
Four million call contracts in a single day — what's the rush?
SPX call volume broke 4 million contracts yesterday, an all-time record. This means → capital is not "testing the waters" — it is making concentrated bets that the index keeps rising.
At the same time, the SPX put/call skew — a gauge of how much more investors pay for downside protection versus upside exposure — posted its largest two-day drop in nearly a decade. In plain terms = the market flipped from "afraid of falling" to "afraid of missing out."
Goldman flow analyst Lee Coppersmith says both data points lead to one conclusion: demand for bullish index exposure is unusually strong.
The actual move beat expectations by four times — why does that matter?
SPX implied volatility priced in a move of roughly ±40 basis points yesterday. The actual gain was 179 basis points — more than four times the expected range, and entirely to the upside.
This means → the options market drastically underpriced the rally. Call buyers earned outsized returns; those who stayed out fell further behind.
Goldman notes the last comparable episode was December 2016. This reflects a degree of sentiment whiplash rarely seen in the past decade.
What happened in July, and why did August flip the script?
July brought near-unprecedented deleveraging and violent position-unwinding across global tech and AI stocks — one of the largest tech selloffs of the past decade.
In the first two August trading days, the pattern reversed sharply: Goldman's trading desk observed near-one-directional buying, primarily through call options, with two consecutive days of the rare "spot up, vol up" dynamic.
In plain terms = July was panic selling; August opened with panic buying — a complete directional reversal.
Can fundamentals support this chase?
Coppersmith calls the fundamental backdrop "hard to argue against": earnings growth is beating expectations materially, hyperscale cloud providers keep raising capex, and AI investment is beginning to convert into revenue growth.
The Atlanta Fed's GDPNow model this week jumped to nearly 6% for Q3 GDP, while the Fed just held rates steady. This means → re-accelerating growth, rising earnings, and fading tightening pressure are all showing up at once — the best macro combination bulls could ask for.
But the positioning catch-up itself carries risk: higher prices make re-entry harder, and every leg up creates additional urgency to chase — potentially producing a dynamic where "buyers queue at ever-higher levels."
Why is Goldman singling out South Korea?
The KOSPI trades at roughly 4.7× forward earnings — the lowest since 2001, below even its global financial crisis trough — while return on equity sits near 25%.
On the memory front, DRAM prices are expected to rise at double-digit quarter-on-quarter rates, demand for HBM — high-bandwidth memory designed for AI chips — remains strong, and long-term contracts are locking up available capacity.
In plain terms = South Korea offers a relatively pure way to position for an AI-hardware recovery at deeply discounted valuations — prices are at historic lows while fundamentals are improving.
What other positioning does Goldman recommend?
Beyond Korea, Goldman suggests worst-of calls — a low-cost options structure that buys upside exposure across a basket of correlated stocks — to capture correlation plays.
Other ideas include Goldman's highest-conviction long-term thematic index (GSXUTHEM) and the metals and mining sector as a second-derivative beneficiary of AI infrastructure buildout.
Coppersmith's bottom line: July's positioning reset did not break the fundamental logic. Whether investors can complete their catch-up in August will be the key test for the next leg of the market.
Content is for reference only, not financial advice.