Episode summary
Big Tech Opportunity
The Markets
· · Hosts: Mike Washington · Guests: Lee Coppersmith
Summary
Lee Coppersmith says the market’s sharp rebound after the ceasefire headlines sits on top of a month of heavy derisking, with clients shorting equity futures, ETFs, and buying protection through index puts. He argues that even after the move higher, there is still a wall of worry, but positioning has reset enough that the market looks more able to keep rallying than it did around quarter end.
He says the dominant trade this year has been dispersion: long single-stock options against short index volatility. That worked until macro anxiety drove a spike in index volatility and forced unwinds across thematic and volatility positions. Against that backdrop, he sees a relative opportunity in mega cap tech, noting that single-stock vol for Mag 7 names versus the rest of the S&P has rarely been this dislocated outside March 2020, and that investors can use cheap calls to express upside.
Looking ahead, Coppersmith expects earnings to confirm corporate resilience and says clients want to rebuild exposure to secular winners, especially AI. He describes a barbell approach: own both AI infrastructure inputs and the transport and other output beneficiaries, and use call options to capture the upside.
Key takeaways
- Lee Coppersmith says clients have been heavily derisking through short equity futures, ETFs, and index put buying, which left the market better positioned for a continued rally after the ceasefire headlines.
- He argues the current setup still has a wall of worry, but the market’s positioning is now more supportive than it was around quarter end.
- Coppersmith says dispersion has been the key trade this year, but macro volatility recently triggered unwinds and hurt that strategy.
- He sees a notable dislocation in mega cap tech volatility, comparing it to March 2020 and saying Mag 7 upside can be expressed cheaply with call options.
- He says investors have not lost confidence in AI and should own both the infrastructure inputs and the output beneficiaries on a barbell basis.
Notable quotes
“Clients have been not necessarily positioned for this type of headline, which is why you're seeing the gap higher over these last few weeks”
“People have been doing that mainly because they want to express their core thematic views in the single stock world”
“you haven't seen this at any other time outside of March 2020 during COVID, right”
“people want to own it on a barbell level, right? So, they want to own both the inputs into AI through the infrastructure plays”
“I think both locally here and over the medium term the level of valuations, the light positioning, and the fundamentals”
How the episode opens
This is The Markets. I'm Mike Washington. Today is April 8th.
And I'm on the Goldman Sachs Equities Trading floor joined by my colleague Lee Coppersmith. Lee co-runs New York equity derivative sales in Global Banking & Markets. Lee, thanks for joining me.
Thanks, Mike. Appreciate it. So, ceasefire.
These headlines that we got overnight of a two week ceasefire. Clients have been not necessarily positioned for this type of headline, which is why you're seeing the gap higher over these last few weeks. On the macro side you've seen, you know, fairly aggressive shorting in the macro community to protect downside.
What do you make of the backdrop that we found ourselves into ahead of the headlines last night? Yeah, so what I would say is that it's been a very challenging environment for the institutional community that we mostly talk to, right? And so, what's defined, call it the last month or so, has been environment.
Clients have felt like they need to derisk. And that's really been led by a lot of shorting in macro products. And, you know, what does that mean?
That means in equity futures, in ETFs. And we've seen it also in our options space where people have been buying a lot more volatility through index option puts. Yeah, I mean, that all makes sense.
And then so fast forward now. We see today's price action, you know, up 2.5 - 3 percent. Is there still a wall of worry that we need to climb?
Are we getting towards the end of these Middle East tensions? Or are investors still truly worried about the forward and needing to hold onto these tail risk hedges to the downside? I think there is a wall of worry.
Now, we have seen a pretty large reset in the geopolitical volatility risk premium that was once associated with the market when we were trading 5 percent lower.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- big tech opportunity
- iran ceasefire deal
- us equities
- equity derivatives
- bullish positioning
Companies and tickers mentioned
- GS
- Goldman Sachs
Watch the episode
Watch “Big Tech Opportunity” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
More from The Markets
The Markets, this episode and its artwork belong to Goldman Sachs. Octagon is not affiliated with the show; this page is an independent summary.
