“Eye-wateringly dire.”

That’s how Nomura’s Charlie McElligott described the vol environment in US equities, where the outcome distribution’s compressing into the early days of what promises to be a long, hot summer.

Realized vol recently collapsed. Five-day has a five-handle, 10-day a seven-handle and 20-day an eight-handle.

As the figure shows, we’re down near levels observed during the height of the November/December “everything bubble.”

What’s keeping spot pinned? In short: Vol-selling.

McElligott described “biblical” overwriting and underwriting. Note the emphasis. Market participants aren’t shying away from selling puts. In other words: It’s not just call-selling from the buy-write ETFs.

Charlie went on to flag “absolutely pervasive” ATM activity. Customers, he emphasized, are focusing on “ultra short-dated stuff” — they’re “effectively selling 0DTE straddles or strangles,” he said.

As the table on the left shows, it’s working. The Sharpes are higher than just being long equities.

The corollary is that dealers’ long gamma position is keeping spot pinned, at least on a closing basis.

“[W]ith $10 billion of gamma in a 1% move [the index options dealer position] is simply choking out the ability to move close-to-close,” McElligott wrote.

You might’ve read a Bloomberg piece or two recently about the multi-hundred-billion-dollar QIS industry. The short-dated options flow mentioned above is part of that. As Charlie put it Wednesday, “the 0DTE space particularly has become a focus of the QIS product offering.”