---
title: 'The World Is Short S&P Calls. Cem Karsan Says That''s How Big Moves End.'
source: 'https://youtube.com/watch?v=W4qsUqpyAOQ'
video_id: 'W4qsUqpyAOQ'
date: 2026-08-07
duration_sec: 1058
---

# The World Is Short S&P Calls. Cem Karsan Says That's How Big Moves End.

> Source: [The World Is Short S&P Calls. Cem Karsan Says That's How Big Moves End.](https://youtube.com/watch?v=W4qsUqpyAOQ)

## Summary

The discussion centers on the recent market rally and the surprising rise in the VIX despite the S&P 500 reaching all-time highs. The speakers explain that this is driven by a 'call squeeze' — forced buying of short call options — and emphasize the importance of fixed-strike implied volatility over the VIX as a true measure of market fear. They also discuss the end of summer dispersion trades and the structural overhang of call positioning in momentum stocks.

### Key Points

- **Market rally and VIX anomaly** [00:01] — The market is up dramatically, but the VIX is not compressing as expected. The speaker notes that after a rally, vol tends to start rising, contrary to common perception.
- **VIX is not a pure fear gauge** [00:43] — The VIX is calculated across the curve, not just at-the-money. Call options have much lower implied vol than puts due to overwriting, so the VIX can be misleading.
- **Call squeeze definition** [01:25] — The market is experiencing a classic call squeeze: people are forced to cover short calls as the market rallies, leading to margin calls and accelerating the move higher.
- **Fixed strike vol expansion is bearish** [03:19] — When implied vol expands at the index level on a fixed strike basis, it can 'unpin' the market and often signals the end of a big move, leading to a market top.
- **Fixed strike vol is the real fear index** [05:38] — The speaker argues that fixed strike vol is the best measure of supply and demand in the market, and is the true 'fear index' — not the VIX.
- **Dispersion trade unwinding** [07:50] — Dispersion has been a big winner in the summer, but as summer ends, the trade is reversing. Index vol on the upside was too low, offering a relative value opportunity.
- **Trading strategy: sell short-dated, buy post-midterm** [10:49] — The speaker prefers to sell late August opex and buy November/December vol, expecting a digestion of the rally and higher vol in the fall.
- **Structural overhang in momentum stocks** [13:10] — Despite the recent rally, massive call positioning in single names remains a headwind for momentum for the next 2-4 weeks. The rotation is not over.

### Conclusion

The market is in the midst of a call squeeze that could mark the end of the current rally. Traders should watch fixed strike vol and momentum closely, as structural positioning remains a risk.

## Transcript

start to see market evolve up that tends to be a very very poor thing for the >> How you looking at these markets? We were just talking about uh record call buying you mentioned but E- Min is up dramatically, NASDAQ up dramatically, V
not being compressed. Uh you might think like well the market's just back to all my all-time highs. Why is the VIX not at 13? You have any insight on that? >> Yeah, so um and we actually talked about this on Monday. Um you know we said
expected after a rally here market at volup to start and the reason is most people think about the VIX as like an indicator of the actual implied v uh
like where it's trading whether trading up or trading down and that's actually not really the case. S&P 500 options are actually uh calculated across the curve, right? And call options are much much lower implied V options uh much lower
implied V in the S&P people overwrite calls in general. Structured products overwrite call all these things compressed. Those Vss tend to be low too low candidly and as you get a big move up you slide now to a low ball that is
just too low period, right? And so actually what you find if you look at the actual S&P 500 options themselves is not only is the VIX going up but the the not only is the VIX going up but the the V is exploding higher um in reality uh
because we slid to a much much lower implied V as we rallied. Um what's driving that again all the short calls that people have in the S&P generally versus uh the calls uh that they've been long in the single names throughout the
long in the single names throughout the summer. Um and this has turned into classic call sweet call squeeze. I mean this is the definition of a call squeeze. Uh basically people are getting risk and margin calls to the upside.
People there have you know people have to cover um the short calls they have because all the long stock they had went away. If they overwrote calls they are um they are being forced to buy them back in. It's that simple. So this is
well beyond the big point here is just uh hey I realized V was high uh you know and implied V was just too low to support it. It it's actually quite simply positioning the the world has been short S&P calls you get this big a
rally um they have to get bought back and and actually to a point where we're actually even getting uh margin calls on the S&P side. Um so uh people have been and the AI space and all these other areas but uh we haven't seen it as much
uh except for maybe this March and June uh again um but but there is a a significant call squeeze going on in the market right now. I think it's I think at 100 points out of the money in the zero day in a market like this you and
really generally speaking if you're looking at S&P you typically see put skew but these are flat like the 7780 to the upside and the 7680 to the downside >> yeah, and it's important it's important to note that is a positioning based, you
know, basically the the world uh got caught uh and and they're having to buy back in the S&P. And this is really important. I the S&P. And this is really important. I want to make this point right here is if
and you start to see market evolve up that tends to be a very very poor thing for the market in the next several weeks. Um why? Because V compression at the index level is one of the things that holds everything in place. And the
more implied V expands at the index level. And by the way, it's expanding on a fixed strike basis. I really want viewers to start to think about fixed strike ball much more than it is at the VIX level. You may be like, "Oh, the VIX
is going uh up. That's interesting." No, it's actually exploding higher from a to explain fixed strike vault to our for our crowd. I don't know if they really >> Yeah, you have skew in the S&P 500 and most indexes. So downside puts are
higher than upside calls and and uh you know as as you guys mentioned it's it's pretty flat now but it's it hasn't been and it really has kind of flipped a bit and it really has kind of flipped a bit right that call skew means if I go
right that call skew means if I go higher I go slide to a lower implied V on a call naturally >> so if we were on let's say a a 17 V and >> so if we were on let's say a a 17 V and we rally 5% I might naturally slide to a
15 V Right. Right. >> And um but when you see the VIX stay at 17, that actually means that ball went up 2%. In reality, like the curve has to have those calls that we slid to have to have went higher. And and so what we
mean by fixed strike ball is that strike that is now the at the money. What ball was that on? Right? Not the floating ball of the uh you know of the index at the money. Um uh because comparing from a supply and demand basis,
what matters is this v by strike. How has that changed? And my point to you is the vice strike has gone up dramatically of these upside strikes that we've slid of these upside strikes that we've slid to. Okay, often the opposite happens on
the downside. The market goes down, right? and you will slide to a much right? and you will slide to a much higher V maybe from a 17 to a 23 people be like oh the va's up ball's up and the reality is no actually in that
scenario the vault is down people are selling ball and fixed strike va is compressed the fixed strike vault is the best measure of supply and demand in the market it's actually the real fear index right people talk about VIX as a fear
index it's really not uh the real fear index is what is happening to the curve what's happening to the vault surface Okay. So, um anyway, we can we can get here is you slide up and you start to see a fixed strike V uh um expansion uh
markets go up, V goes up. Um this can really unpin markets um and create not just more volatility, but uh you know, in this scenario, a lot of people might the premium on their calls that they were short. It creates a complacency to
the downside. unpins the market and it is often um how how big moves end with they tend to end with call squeezes and market upfall. So uh so something to be watchful for and this is a quick move you know it could very well we're also
compressing in the short term but we I we we kind talked about this before you we we kind talked about this before you know 60 90day ball is way too cheap at know 60 90day ball is way too cheap at this point. uh whether the the uh 10day
ball or 15-day ball goes up or down will be a function of the market uh really on a realized basis realizes in the short term. But quite frankly, we've slid to way too low an implied ball. And I think um as you start to see this this call
squeeze uh kind of expand ball, you're more likely than not than to see that from here, whereas the stuff in the front could could compress. So, so particularly interesting >> really. Okay. Yeah. I mean, um, I I know
in, they were saying you were doing a couple of different trades. Are you, as far as your trades, are you sort of trying to take advantage of this now where we're seeing, you know, the squeeze to the upside for some degree
calls. Are you trying to take advantage of that or are you just like, no, I'm just trading the way that I normally trade. I'm not necessarily worried about that. And and again, like what is your terms? Are you looking at 3 month, six
going on near-term like you just said because of this calendar call potential situation or are you like nah? >> Yeah. So first off we are always looking at things on a relative value basis right uh we may be uh relative to an
index right so uh particularly in the summer the you know dispersion has been summer the you know dispersion has been a huge you know uh win for for us that's something that that we've highlighted is you know is highly likely to perform
well in the summer. Um what we start to do as we get to the end of the summer is the opposite, right? Dispersions had a record, right? Things you start to begin record, right? Things you start to begin to see more delta 1 action. Um and so
this was an opportunity for traders. Index ball on the upside was way too low as we talked about. It was likely if the market went up, you're likely to see market goes down that that ball is probably going to expand. So, so really
great relative opportunity in the indexes particularly relative to some of the single name stuff that has been uh jacked on the call side. So, so that um were able to take advantage of and that we think will continue to mean revert as
we get out of the summer. And the reason for that is not just oh I think this up. It's really a function of the dispersion V had gone too far and the compression of the index level are now ending. Right? they're coming to the end
of the summer or you know diminishing I guess I should say. Um so so that is really um kind of how we think about things uh that is relative value right um but it is also um an opportunity
um because a lot of those uh the index itself hasn't gone anywhere from a realized basis um and >> ball wise you're saying hasn't gone >> directional hasn't gone >> we're up a little bit here
>> what >> has gone down big and up big, right? But net net, where have we gone this summer? >> We've seen the last four days. I'm not saying the last four days. I'm saying this summer. Net net, we have
gone nowhere. This is what happens in summer. You get a lot of chop. Um and uh and so you have to zoom out, right, and take a look at what's what's actually happening. Uh meanwhile, you've had uh you know, a a significant dispersion in
you know, a a significant dispersion in performance underneath the hood. Um so point is uh this is an opportunity uh from a a lot of the flows are what's driven this performance this summer um in the underlying stocks themselves. So
not just on a vol basis but on a single stock basis and uh and that represents an opportunity for uh a bit of mean reversion as you come out. So when you calendars um just to be super clear are
you looking at like long October short September I mean you can see twice the amount of time but you're you're getting 70% of the implied move in the 43day 70% of the implied move in the 43day cycle relative to se to October plus -
416 points plus - 316 points you have twice the amount of time like is this spacing or you looking at different expirations >> uh I would prefer to have our shorts much closer so we think imply side
starting to go up. So, we really want to be uh you know, August uh opex uh maybe uh end of August opex, but really basically end of summer.
>> We think there's now that we've had this big rally, right? It's natural that there's going to be a digestion that happens of this rally. Um and then we think V itself is is broadly going to go higher. and not just realize volat we
could sit here for two weeks is my point and you could see the front of the curve you know implode all that ball disappear trying to put band-aids on this buy gamma deal with all on that um meanwhile
so you got this significant opportunity now after a big move of of a of a digestion of a the implied ball spike on the calls in the short ball spike on the calls in the short term um kind of giving way and meanwhile
uh people looking forward uh to the midterms and the fall and the next year which has incredible risks in it and the volumes are too low back there and that to answer your question I'd be buying
post midterm so so November December um and really uh you know selling late August something along those lines. >> Um well yeah no Jim is absolutely right who who haven't seen it. If you look at DSPX, that uh tells you so again
dispersion was um was very high not too long ago. We were seeing all these different names move, right, Jim? And then now all of a sudden um and and this actually this is actually in the SIBO note that came out Monday um that they
bring out um as I'm as I'm teasing that up here. I really shouldn't be. It's not kidding. Um but that that's a really great note that they bring out. And uh curve, you can see it. It's part the change. And um that gets to the point of
Mike, when we were saying we haven't seen that rotation as much as we were we were seeing that big rotation for a long time. Chips out of chips into uh the the consumer staples and into the software even and and I want to get your thoughts
on this too and then back and forth. But ever since what happened a couple of days ago with the situational awareness, we're not seeing that. Have you noticed that? Yeah, I would say the situational awareness piece uh is it obviously it
reflexively also accelerated that rotation at the end. uh it wasn't just them uh you know there's stories of um funds in Germany and and abroad having issues >> um but the original reason for that
rotation I want to be clear was positioning in the market right uh this are like long all like AI is going to do xyz over the long term uh because of uh
much earnings they're going to make right fundamental view these a lot of don't think about position, don't understand the amount of volatility that can happen as a function of it. Um and and when and they're overlevered. Uh and
so those things led to that decline. I want to be clear that wasn't the cause. I think it was more of a final effect. But um and because of that, I would But um and because of that, I would argue that uh the structural effects
place. All the call buying and the single names are still in place for at least another month here. And so those are on a rotational momentum basis still are on a rotational momentum basis still an overhang. Um and so I just want to
an overhang. Um and so I just want to like dismiss the kind of oh well Leopold was the cause. That's what drove the decline. That was part of it at the end, but the structural primary part of of why that rotation happened, why uh
that's likely to still be an overhang are still in place, which is massive call positioning. uh uh dealers massively short um at the at the momentum level semi-memory whatever level and and those uh those
things are still in place uh and I would say at least for the next two to four weeks um that's going to be a headwind for you know despite the great two-day let's say performance uh on on uh for momentum
um I would also highlight the first two days of this rally didn't look >> isn't that usually That kind of goes though. right? It looks like nothing and people sell into it and then
>> not usually the winner the loser. >> Sometimes I would say a lot a lot of the biggest losers become the biggest winners in a in a Vbottom, right? Um but uh but my point is just watch that momentum trade closely. Not just the
move of the index, but what is momentum doing? And look at today. The NASDAQ's doing? And look at today. The NASDAQ's up 44 basis points. The S&P is up 61. >> Yeah. >> Um particularly in a in a call squeeze.
>> So my my point to you is just just watch that closely here. I I don't I actually think there's a lot of [sighs and gasps] still overhang there. And the same still overhang there. And the same things that drove the initial rotation,
you know, against it are still in place here into this rally. And if anything, all the call buying in that area is going to force another wave of that. And that's dangerous. So just be careful that you know what would happen now if
after this 4-day big rally uh where it shows momentum still dramatically underperforming over the course of the summer this 4-day window but the course that that rolled back over on a momentum basis that doesn't look very good as
precisely as you had market up so just just be watching that it's an interesting kind of important uh part of of the story that a lot of people aren't into your summer thesis that you laid out the last time you hear So kudos so
out the last time you hear So kudos so far. And Jim, just one time, one time, >> I want a guy that owns a fund like this, Situational Awareness or SPF. I want him to look like a model. Just one time. Like one [laughter] time.
>> Yeah. Um, no, that's uh he not only I think somebody posted this on Twitter, but not only does he did he not have situational awareness, uh, no social >> Exactly. >> You know, that's what I'm saying, man.
like why can't you know what >> it's it's part of the it's >> you got to be you got to be a bit of a a nerd savant uh to to get in that position I guess but uh but yeah why can't you have both I don't know
>> maybe one day hey there's black swans uh that have happened elsewhere maybe that's that's what we're that's what we're pulling for in the future but Jim appreciate you uh Monday show >> loved it uh and you can catch Jim on the
Monday shows of course Monday 3 p.m. Central. Always talking volatility, Central. Always talking volatility, options, macro