Full-Blown FOMO! Goldman Sachs Capital Flows Expert: Option Volume Hits Record High as US Stocks Stage a "Frenzied Chase"

The massive deleveraging and tech stock sell-off in July had just ended when market sentiment quickly reversed in early August.

The latest Goldman Sachs research report shows that investors are rapidly rebuilding their risk exposure, with demand for call options surging to historic highs. The market has begun entering a positive feedback loop of "buying more as it rises," driven by position covering. Lee Coppersmith, liquidity strategist at Goldman Sachs, stated bluntly: "July completed the position reset, and now, investors are spending the entire month of August chasing the rally."

Data shows that call option volume on the S&P 500 Index (SPX) exceeded 4 million contracts on Tuesday, setting a new all-time single-day record; meanwhile, the SPX put/call skew recorded its largest decline in nearly a decade over the past two trading sessions, reflecting a sharp increase in investor demand for upside Market Exposure.

More notably, the S&P 500 Index rose 179 basis points on the day, while the options market had previously priced in volatility of only about ±40 basis points. The actual gain was more than four times the implied volatility range. Goldman Sachs pointed out that the last time a similar situation occurred was in December 2016.

Resonance Between Fundamentals and Macro Environment Makes the Rush-to-Buy Logic Hard to Disprove

Coppersmith believes that this round of position rebuilding is not driven solely by sentiment, but is the result of simultaneous improvements in earnings, the economy, and liquidity conditions.

At the corporate level, this earnings season has once again confirmed that profit growth continues to Earnings Beat. Large cloud computing vendors continue to raise capital expenditures, and many companies are beginning to demonstrate that AI investments are gradually translating into revenue growth, commercialization capabilities, and improved returns on capital. The logic of AI investment is shifting from "input" to "realization."

On the macro front, US economic data also provides support. The Atlanta Fed's GDPNow model has recently raised its forecast for US third-quarter GDP growth to nearly 6%, while just a few days ago, the Federal Reserve announced it would keep interest rates unchanged. Coppersmith believes this constitutes a highly supportive combination: the economy is re-accelerating, corporate earnings are continuing to improve, and the risk of further monetary policy tightening has temporarily receded.

Meanwhile, the simultaneous decline in oil price volatility and interest rate volatility has further weakened the rationale for investors to maintain low positions, accelerating the return of funds following the previous large-scale reduction in holdings.

Positions Remain Light, and the "Increasingly Urgent" Chase Effect Is Taking Shape

Despite the continuous market rebound, Goldman Sachs believes that the current position structure remains favorable for further gains in risk assets.

Coppersmith pointed out that after experiencing one of the largest tech stock de-risking events in the past decade, it is clearly premature to conclude that investors have fully returned to the market based on just two trading sessions.

On the contrary, rising prices themselves have increased the psychological threshold for rebuilding positions, making it increasingly difficult for sidelined capital to wait for a pullback. This creates a typical "increasingly urgent" dynamic—each rally further intensifies the pressure on investors to chase positions.

This sign has already appeared at the trading level.

The Goldman Sachs trading desk stated that in the first two trading days of August, client demand for index Beta exposure was exceptionally strong and almost entirely concentrated on the bullish side. Meanwhile, the market saw the rare combination of "Spot Up, Vol Up" (spot prices rising while implied volatility rises simultaneously) for two consecutive days, indicating that investors are not taking profits during the rise, but are continuously buying new upside protection and leveraged exposure—a phenomenon that is historically uncommon.

Goldman Sachs Remains Bullish on South Korea: The Most Cost-Effective Play on the AI Hardware Recovery

In addition to US stocks, Goldman Sachs also lists the South Korean market as one of the most attractive catch-up opportunities currently available.

Coppersmith pointed out that the Korea Composite Stock Price Index (KOSPI) currently has a forward P/E ratio of only about 4.7x, the lowest level since 2001 and even lower than during the Global Financial Crisis, while the market's Return on Equity (ROE) remains close to 25%, creating a stark contrast between valuation and profitability.

From a fundamental perspective, the memory industry's prosperity is still improving. Goldman Sachs expects DRAM prices to continue rising by double digits month-over-month, demand for High Bandwidth Memory (HBM) to remain strong, and long-term supply agreements to continue locking in new capacity.

After undergoing historical adjustments and record-selling pressure, Goldman Sachs believes that the South Korean market may be the most direct and cost-effective choice for positioning in the AI hardware cycle recovery at current low valuations.

Risk Warning and Disclaimer

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