US equities came into the June FOMC meeting not just in melt-up mode, but in “crash-up” mode.

The two aren’t mutually exclusive, but the former tends to precede the latter. To grasp the distinction, you’ll need to be fluent in market colloquialisms — Merriam-Webster isn’t your go-to for this.

As discussed here on a number of occasions, markets have evidenced a “grab” for upside as a previously under-positioned (but now more neutral) discretionary crowd chased the rally. You can see it options, and also in what, on some days, is a readily apparent effort on the part of some market participants to catch up by reaching for upside in left-for-dead cyclical value.

An optimistic interpretation of, for example, the Russell 2000’s recent outperformance is that the narrow rally is broadening and/or that economically-sensitive sectors are taking a better view on the macro. A less benign assessment says it’s risk-taking behavior indicative of anxious investors chasing the tail-end of a rally they missed. (It could be an “ominous harbinger” or it could be “sunny bellwether,” as I put it.)

In a Wednesday note, Nomura’s Charlie McElligott described the “ongoing crash-up,” which finds spot “blow[ing] through overwriter short call strikes… with market chasers and underperformers grabbing into upside in ‘the stuff that’s been left behind.”

The figure above speaks volumes, and Charlie added a helpful annotation.

Note the read-through of the crash-up for overwriters and also for 2023’s erstwhile reliable strategy. “[The] recent environment… has stood in marked contrast to the prior YTD ‘sell straddles’ dynamic, where we had been sitting comfortably within the daily straddle implied range bands,” McElligott wrote.

“Had been” past tense. Now, spot is breaking through the upper-end of the range 43% of the time, as shown in the figure on the left below.

The corollary is a paradise for put sellers (figure on the right above). But The Road is rocky for overwriters. As Charlie put it, “It’s ‘no country for call sellers’ in this local ‘Spot Up, Vol Up, Crash-Up’ environment.”

Most readers will hopefully get the references. Cormac McCarthy passed away earlier this week.