FOMO everywhere! Goldman Sachs capital flow expert: options trading volume hits a record high, and U.S. stocks are staging a "crazy rally."

The large-scale deleveraging and tech stock sell-off in July had just ended when market sentiment swiftly reversed in early August. Goldman's latest research report shows that investors are rapidly rebuilding their risk exposures, with demand for call options soaring to historic highs, signaling that the market has begun to enter a "buy the dip" positive feedback loop driven by position replenishment. Goldmans liquidity strategist Lee Coppersmith stated, "July completed the position reset, and now, investors are chasing the market throughout August." Data revealed that the trading volume of S&P 500 index (SPX) call options exceeded 4 million contracts on Tuesday, setting a record for the highest single-day volume. Meanwhile, the SPX put/call skew recorded its largest decline in nearly a decade over the last two trading days, reflecting a sharp increase in demand for upside risk exposure among investors. Notably, on that day, the S&P 500 index rose by 179 basis points, whereas the options market had previously only priced in a volatility of about 40 basis points, indicating that the actual increase surpassed the implied volatility range by more than four times. Goldman noted that a similar situation last happened in December 2016. Fundamentals and the macro environment resonate, making the rush for positions hard to falsify. Coppersmith believes that this round of position rebuilding is not solely driven by sentiment, but rather a result of improvements in profits, the economy, and the liquidity environment. From a corporate perspective, this earnings season has again validated that profit growth continues to exceed expectations, with major cloud computing companies raising their capital expenditures. Multiple firms are also beginning to demonstrate that investments in artificial intelligence are gradually translating into revenue growth, enhanced commercialization capabilities, and improved return on capital, marking a shift in AI investment from "input" to "realization." On the macro front, U.S. economic data is also providing support. The latest GDPNow model from the Atlanta Fed has raised its forecast for U.S. GDP growth in the third quarter to nearly 6%. Just days prior, the Federal Reserve announced it would maintain interest rates. Coppersmith believes this forms a highly supportive combination: a reacceleration of the economy, continued improvement in corporate earnings, while the risk of further tightening monetary policy has temporarily receded. At the same time, the simultaneous decline in oil price volatility and interest rate volatility further weakens the rationale for investors to maintain low positions, accelerating the funds' return following substantial reductions in positions. Positioning remains light; a "buy the dip" mentality is forming. Despite the market's consecutive rebounds, Goldman believes that the current position structure still favors further increases in risk assets. Coppersmith points out that after experiencing one of the largest tech stock deleveraging events in the past decade, it is clearly premature to conclude that investors have fully returned to the market based on just two trading days. On the contrary, the price rise itself has increased the psychological threshold for rebuilding positions, making it increasingly difficult for outside funds to wait for a pullback, thus creating a typical "buy the dip" dynamiceach round of rising prices further intensifies the pressure on investors to chase positions. This indication has already appeared at the trading level. Goldman's trading desk indicates that in the first two trading days of August, there was an unusually high demand from clients for index beta exposure, nearly all concentrated in the bullish direction. Meanwhile, the market also exhibited a rare combination of "Spot Up, Vol Up" (spot price rises and implied volatility rises) for two consecutive days, indicating that investors are not taking profits during the rise, but are instead continuously buying new upside protection and leveraged exposure, a phenomenon that is historically uncommon. Goldman remains optimistic about South Korea: it is one of the most cost-effective investment directions for the recovery of AI hardware. In addition to U.S. stocks, Goldman has also identified the South Korean market as one of the most appealing opportunities for a catch-up rally. Coppersmith noted that the forward price-earnings ratio of the KOSPI (Korea Composite Stock Price Index) is currently about 4.7 times, at its lowest level since 2001, 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 continues to show signs of improvement. Goldman expects DRAM prices to maintain double-digit month-on-month increases, with strong demand for high-bandwidth memory (HBM) and continued locking in of new capacity through long-term supply agreements. After a historic adjustment and record sell-off, Goldman believes the South Korean market may be the most direct and cost-effective choice for positioning in the recovery of the AI hardware cycle at lower valuations. This article is reproduced from "Wall Street Insight"; GMTEight editor: Chen Siyu.