The muscle memory that says you sell vol on any meaningful expansion and/or setback for risk assets was in play during Tuesday’s fireworks.

“We absolutely witnessed that same reflexive vol-selling,” Nomura’s Charlie McElligott said Wednesday, of the prior session.

The figures below show the one-day change in S&P put-selling and VIX call-selling.

That was into the stock swoon (catalyzed, of course, by a harrowing day for the US long-end).

That probably helped prevent the equity selloff from snowballing into something more nefarious. “The one-day selling in S&P puts and VIX calls… provided some market stability during the last two hours of the US cash equities trade, as dealers get back some of their short gamma after the slip lower,” McElligott went on.

In terms of dealer gamma in SPX, there’s some insulation just below spot, but there are pockets of negative gamma (and thereby accelerant flow risks) littered about, both overhead and below.

Meanwhile, vol control strats probably cut equities exposure yesterday. An ongoing theme here has been equity vol’s inability to “realize” implied daily moves. That changed early this week. “Index vol finally over-realized,” Charlie said. The read-through: Some of vol control’s legacy stock exposure (built atop what was a never-ending glide path lower for realized vol) got mechanically reduced. On Nomura’s estimates, vol control mechanically sold somewhere in the neighborhood of $19 billion of equities futures late Tuesday.

Looking ahead (and setting aside a more esoteric, if very notable, discussion around the call spreads mentioned here on Monday), it’s really a matter of how the data evolves and, more to the point, whether the macro picture in the US cools enough to soften the Fed’s rhetoric and blunt the bond rout.

The seasonality (shown above) is obviously favorable, but if the Fed keeps pounding the table on “higher-for-longer” and/or it starts to look like 2.5% 10-year reals is the new reality, risk could struggle.

“Equities bulls either need to see i) rates chill out, potentially via some ‘bad (economic data) is good (for assets)’ developments or a Fed shocker like YCC if the UST selloff were to get sloppier from here or, ii) wait out the next few weeks until EPS begins and can slowly turn the tide [as] funds can start adding to names again and corporates can begin buying back their stock into the historically uber-bullish Q4 seasonal.”