You’ve all heard me carry on recently about the potential for more re-leveraging from systematic cohorts as realized vol receded, and additional stock-buying from discretionary investors left in the lurch by a post-election melt-up that wrong-footed an over-hedged market.

The point is (or was) that overall positioning wasn’t as extreme as you might be inclined to believe given headlines touting record inflows to US equity-focused ETFs and mutual funds and the generally inexorable character of the rally.

With that in mind, one key systematic cohort’s now pretty close to “maxed,” if you will, according to Nomura’s Charlie McElligott, who on Wednesday noted that vol control’s equity allocation sits in the 98%ile looking back three years.

“Realized vol’s absolute cratering has seen that target vol reallocation buying into equities exposure go ballistic,” he wrote, illustrating the point with the figures above.

Is that ominous? Not necessarily, it just means the latent, mechanical bid under the market has now manifested, as it were, past tense.

Meanwhile, they’re buying VIX calls, which in turn has dealers’ short position looking a bit stretched, as illustrated by the figure on the left, below.

“Over the past few weeks, I’ve been discussing VIX upside [as] the best hedge for an ‘accident,’ especially as equities positioning for systematics was pushing into ‘extremes,'” Charlie wrote.

Note the figure on the right: Think of that as a snapshot of the potential impact of exchange-traded VIX products in the event things get spicy. “The source of a potential ‘vol squeeze’ mess is not solely from the VIX options space,” McElligott wrote, in the same Wednesday note. “Part of the ‘VIX shock’ risk derives from ETNs and their own large rebalancing needs in the case of a VIX gap higher.”

The overarching message from McElligott: “Watch the [vol] space, as it’s increasingly reminiscent of the ‘energy build-up’ we saw this past summer ahead of the ‘VaR events of August and September.”