Dealers shedding VIX futures into expiration might’ve put a lid on vol, but it wasn’t enough to arrest what’s now threatening to become a three-week selloff in US equities.

On Thursday, Nomura’s Charlie McElligott reiterated that the “meaningful” move lower in spot came courtesy of “a prolific delta purge as calls got roasted while scrambled-into puts went in-the-money.”

At the same time, the downdraft was exacerbated by the negative gamma backdrop, which is conducive to so-called “accelerant flows,” as selling begets more selling.

McElligott called index options dealer negative gamma “unprecedented.” Peak short gamma ($30 billion per 1% move on Nomura’s estimates) is around 4,320.

The selloff in stocks has been abetted by systematic deleveraging and particularly CTAs, which Nomura estimates sold more than $41 billion over the past week across global equities futures. That selling was mostly in Asian shares ($24.4 billion).

“As anticipated,” there’s been an “impulse deleveraging of global equities’ longs across the CTA trend space into the spot bleed,” Charlie wrote.

Looking ahead, it’s the same story: Vol control is the biggest de-leveraging threat in light of mountainous exposure accumulated over the prolonged period of suppressed realized vol.

“Vol control strategies remain the largest equities downside flow risk from a systematic perspective,” McElligott added. “In the post VIXpery period, we may now finally be able to see an expansion of realized vol with not just a reset higher on the absence of the past week’s selling of VIX futures from dealers, but actually too on higher realized correlation post earnings season.”