High volatility sweeps global stock markets! Rapid rises and falls are playing out in succession, kicking off the hardest-to-bear roller coaster drama on Wall Street.

Global stock market traders are hedging against the risk of further heightened market volatility in the coming weeks. Before the global markets return to relative calm, they may experience several weeks of intense volatility and turbulence. Some options market traders are betting that the most difficult aspect of the stock market's volatile trend will continue for at least a week or even a month, until after the official meeting of the leaders of the world's two largest economies, at which point the market may return to a relatively calm and normalized trading pattern. "The high volatility is the common enemy of all investors and professional traders," this statement is increasingly significant in the current environment of intense volatility. The current high volatility environment is expected to continue in the short term. This kind of intense volatility is particularly harmful to professional funds because it not only makes it difficult to predict direction, but also raises hedging costs, shortens holding tolerance, compresses leverage efficiency, and may even lead correct fundamental judgments to lose to incorrect timing. In other words, traders are not just fighting against a single trend, but also multiple noises created by oil price gaps, frequent market reversals, systematic fund rebalancing, private credit, and AI panic stacking up. The Goldman Sachs strategy team stated that the current situation in global stock markets, including the US stock market, is not the start of a new bullish trend after the end of the negative news, but more like a high-volatility intermediate phase that has been temporarily interrupted by geopolitical easing expectations, but has not been completed yet. Goldman emphasized that under the impact of volatility, CTA has entered a mechanical reduction and passive selling mode, which means that in the short term of one week to one month, the market will continue to face systemic selling pressure unrelated to fundamentals. Some traders have pointed out that the new round of Middle East geopolitical conflicts is not the only factor affecting market trading logic. The upcoming meeting between the leaders of the two largest global economies, the US and China, in late March or early April in Beijing is also expected to shake the global financial markets. Options traders are actively betting that stock market turmoil will continue for at least another week or month in the future. It is not until the conclusion of the meeting between the leaders of the two largest global economies that the market is expected to gradually return to relative calm. "With the Middle East conflict ongoing, traders are preparing for short-term intense volatility" It is undeniable that the most professional senior traders on Wall Street have been buying a large number of short-term put options on the S&P 500 index, which will only yield positive derivative returns when the stock market shows a significant decline. Although the daily volatility of the stock market remains relatively limited, this has significantly increased the expected volatility index and significantly raised the cost of downside protection. For example, suppose that one option pays a profit when the S&P 500 index falls by 5% in four weeks, and another option bets on a 5% increase. However, earlier this month, the premium of the former relative to the latter reached its highest level since 2021. As shown in the graph, the skewness of the S&P 500 index put options has surged due to hedging demand - the premium of put options is close to the highest level since 2021. The price difference between the put option "betting on a 5% decline in four weeks" and the call option "betting on a 5% increase in four weeks" reached the highest level since 2021, indicating that the market's fear of a decline is much stronger than the expectation of an increase. "This indicates that the market is currently filled with a strong fear of downside, which undoubtedly will trigger intense market volatility," said David Montoni, director of institutional derivatives and QIS sales at UBS Securities in the United States. According to Kilchenstein, the rise in oil prices, the panic of "AI disrupting everything," the widening credit spreads in the market, and concerns about the private credit market are prompting institutional investors to maintain their hedging positions even as the cost of downside protection becomes more expensive. Signs of rising protection demand are also evident in the futures market linked to the Chicago Board Options Exchange Volatility Index (VIX, also known as the panic index). Parts of the VIX curve have shown significant inversion, which means that the prices paid by traders for short-term protection are much higher than the cost of hedging for longer periods. This situation is similar to the trend in the oil futures market: concerns about the potential disruption by the conflict in Iran have caused a significant increase in prices for near-month contracts. While North American crude pricing benchmark WTI crude oil rose 5% to $91.60 per barrel, the S&P 500 index futures fell by 0.5% at the time of writing. Although investors are actively paying higher costs for short-term protection, their options holdings show that some traders are starting to anticipate a moderation in volatility later this spring. Many are setting up trades that will benefit if tensions ease and oil prices significantly drop, allowing these trades betting on a decline in volatility metrics to be profitable. If the timeline of options holdings serves as a guide, Trump is expected to visit China and meet with Chinese leaders from March 31 to April 2, a visit that could serve as a positive catalyst for these trades. "We see clients looking for positions that can benefit from tensions easing, significant drops in oil prices to the $80 to $70 per barrel range," Kilchenstein said. These trades include buying put options on the VIX expiring in April or May - a bet that market volatility will significantly decrease; at the same time, selling short-term options on the S&P 500 index and buying longer-term call options to position for a rebound in global stock markets after volatility calms down. Some investors and traders are also choosing to buy put options on energy stocks and exchange-traded funds (ETF assets) expiring in April, betting that if tensions between the US and China ease, geopolitical tensions decrease, and oil prices stabilize, oil-related stocks will see a significant decline. Others are positioning for a rise in Chinese stocks ahead of the upcoming US-China diplomatic meeting. Goldman Sachs traders tend to avoid this round of short-term rebounds, emphasizing that the larger market risks have not yet dissipated A recent report from Goldman Sachs' senior trading team showed that the current situation in the US stock market and global stock markets is not the start of a new uptrend after the end of negative news, but more like a high-volatility intermediate phase that has been temporarily interrupted by geopolitical easing expectations and has not been completed yet. Goldman emphasized that the CTA strategy funds, known as "fast money," have entered a mechanical reduction and passive selling channel under the impact of volatility, which means that in the next one to four weeks, the market will continue to face systemic selling pressure unrelated to fundamentals. The JPMorgan analysts pointed out that the current positioning has only returned to neutral and has not reached the conditions of a sustainable rebound typically seen after panic deleveraging. Therefore, the recent rebound is more likely to be driven by short covering and sentiment repair, rather than new capital-led positioning, and the high probability of intense volatility in the global stock markets in the short term. JPMorgan warned that if the conflict continues, traders are still not adequately prepared for a maximum 10% pullback in the S&P 500. This means that many rebounds at the moment do not represent a true restoration of risk appetite but more like a fragile short-term rally ignited briefly by the news but could be interrupted at any time by systemic selling pressure. What is even more concerning is that the market's microstructure is deteriorating significantly. Goldman's assessment is not just that "CTA will sell," but that "CTA selling pressure, negative gamma environment, and insufficient liquidity" are resonating: market makers are in a short gamma state, meaning their hedging behavior will amplify cyclical fluctuations; at the same time, the E-mini depth of book is approaching historical lows, indicating inadequate market capacity. In this structure, prices no longer just reflect market news, but are more easily pushed towards larger fluctuation ranges by the trading structure itself, and once key technical levels are breached, systemic selling pressure is likely to further intensify. Goldman Sachs traders choosing to "avoid this round of rebound" fundamentally reflects concerns about the insufficient pricing of deeper risks. While the easing of the Middle East situation may reduce the right-tail risks of oil prices and volatility in the short term, it only temporarily alleviates the surface anxiety in the market and does not resolve the unresolved core contradictions, including whether the valuation of popular tech stocks related to AI is overstretched, whether private credit faces repricing pressure, and whether the weakening of US macroeconomic data, the pessimistic narrative logic of "AI disrupting everything" dominated by AI agent-based workflows, is eroding profit expectations. Therefore, the statement "high volatility is the common enemy of all professional traders" is particularly true in the current environment. Traders are not just fighting against a single trend, but against multiple noises such as oil price gaps, frequent market reversals, systematic fund rebalancing, private credit, and AI panic. In other words, geopolitical events have temporarily shifted market focus from whether asset pricing is too high under multiple threats to whether the conflict will escalate; once the latter cools down, the former will become the leading variable again. The more reasonable benchmark scenario in the current market is not "one-sided collapse" but "repeated large swings under high oil prices". Unless there is a clearer, verifiable de-escalation of the Middle East situation, a significant drop in oil prices, and the temporary release of systemic selling pressure and active digestion of macroeconomic risks, global stock markets are likely to be in a high-volatility price discovery period in the short term, rather than a steady trend market.