Goldman: "There Is Zero S&P Call Demand On The Trading Floor"

There was some concerning data in the latest note (which we discussed here) from Goldman derivatives guru Brian Garrett.

The first notable observation, was that the long only community is turning increasingly bearish, having finished the week 4bn better for sale (and $10bn better for sale month to date). According to the Goldman trader, this was one of the largest monthly sell skews for asset manager / long only community in 4 years, and other similar large sell months occurred during Aug 2022 (-18bn), Mar 2024 (-14bn), and Mar 2025 (-22bn). The silver lining is that all of these months marked local drawdown peaks.

Besides increasingly bearish vanilla flows, the option market is similarly getting more defensive: Garrett notes that one-month skew trades at the steepest level in 4 years, driven both by the expensiveness of downside puts and the cheapness of upside calls;

Anecdotally, he shared an observation that has been making the rounds across the Goldman desk namely that "we still have seen zero S&P call demand on the trading floor "

While this may be apocryphal about big institutions, it certainly is the case with retail: as Garrett also observes, megacap tech stocks are no longer crashing higher as "the retail community shows signs of exhaustion in buying upside." As the next chart shows, over the last month call volumes in mega cap stocks has fallen to levels last seen in 2017, or as Garrett puts it, "its less fun chasing call options when they stop working (and one experiences the true meaning of “theta decay”)"

Hartnett then touched on what may be the key reason for today's brutal selloff: the same one we discussed last week ahead of last week's opex...

Goldman: "Following last week's moves, the market continued to see large intraday swings given liquidity is not set up well here. Rallies encounter fresh gamma supply, while dealers move shorter gamma on further sell-offs. Tension remains with the panic index hovering ~8.6."

— zerohedge (@zerohedge) February 18, 2026

... namely the plunge in gamma after the VIX/Opex "unclenching". It's a dynamic Garrett "can’t unsee as we test the lower end of this extremely tight range, and gamma flips negative on a minimal sell off, which also coincides with the Goldman CTA momentum thresholds" which to Garrett "is extremely important" as it won't take much to spark a full-blown selloff.

Putting it all together, recall, that last week, global equities saw the largest net selling since liberation day...

...  which alongside the latest data, leaves prompts Goldman to conclude that "investors are taking down risk in what feels like preparation for the index to finally reflect what single stocks have been saying for a while (i.e. "something’s got to give")."

Goldman's Delta One head, Rich Privorotsky, isn't too far in his market assessment and writes that "the NDX and the SPX are struggling to catch a sustained bid. There are no clear signs of heavy supply, but it feels like capital is rotating elsewhere. Non-U.S. indices, whether in equities or bonds, are breaking out. Commodities continue to trade well. Perhaps this reflects the idea that AI disproportionately disrupts knowledge work… which is a large share of the SPX… whereas global indices are more exposed to real assets, manufacturing, industrials and resources. It makes you question how much U.S. outperformance versus the rest of the world was structural versus simply compositional. If tech does not work… the U.S. does not work?"

It's not all bad news, thought, and as the bank's systematic desk writes on Monday (full note available to pro subs), its models estimated CTAs had sold $12.5bn of Global Equities on the week, decreasing their overall exposure to +$143.7bn (84th percentile over a year), but this cohort flipped to net buyers last Thursday, with more purchases to come over the next week/month in a flat market scenario ($4.5BN of Global Equities purchases expected over a 1-week horizon) in a flat market scenario, and a +$10bn on a one-month horizon.

On the other hand, a big selloff would lead to $12.5 billion in global sales, of which the bulk of $8.5 billion, would come from the US.

And while the S&P just crossed below the short-term CTA sell threshold at 6,903, the big selling pressure would come if/when the S&P drops below the all-important medium-term S&P trigger, which is about 100 points lower at 6,735.

Another potential upside factor is that buyback blackout is almost fully over, and 85% of S&P firms are now back into the open window (although a key question here is with Mag 7s spending all of their FCF on capex, how much is left for buybacks)? As an aside, buybacks are currently on pace for the 3rd highest authorization pace on record, even if we don't get any major new buyback announcements in the future. 

Putting it all together, here is summary of the different positioning and flow dynamics currently in the market according to Goldman's trading desk. 

More in the full Goldman note available here and here to pro subs.