Things were suddenly interesting. And then, just as suddenly, they weren’t again.

The fleeting selloff which found US equities “tumbling” (note the scare quotes) ~5% from records last month naturally saw trailing vol pulled higher.

As the figure below shows, one-month realized jumped to ~15, 90%ile on a one-year lookback.

With the equity swoon apparently over, corporates set to exit buyback blackouts and vol supply once again outstripping demand for downside hedges, it’s quite likely that the uptick highlighted in red will fade.

The ebb and flow (i.e., the move higher in vol and a prospective reset lower) matters. “The implications… are to be most clearly seen in systematic investor flows,” Nomura’s Charlie McElligott wrote Tuesday.

According to Nomura’s estimates, the vol control universe mechanically shed more than $28 billion in equity exposure over the past week and nearly $45 billion over the past two weeks as a result of the vol expansion illustrated above.

The figure on the left shows you the de-leveraging. The table on the right gives you a sense of the hypothetical exposure adds in the event the daily distribution of spot equity outcomes compresses going forward.

“Due to the real-time vol reset, trailing realized is set to get crunched, which sets for a large mechanical reallocation ‘buy’ in the days and weeks ahead in the case of smaller daily changes,” McElligott went on.

If the S&P manages to stay within a 50bps daily range, vol control strategies could see more than $23 billion in buying over the next week and nearly $60 billion over the next month.

Of course, if the distribution of daily outcomes were to instead expand, vol control could see additional de-leveraging.