Citadel trader "turns bullish": Ten reasons the market will see a "tactical rebound"

Former Goldman Sachs capital flow expert and current Citadel Head of Equity and Derivatives Strategy Scott Rubner has officially abandoned his previous tactical bearish stance and turned bullish, with the core catalysts being the decline in volatility and the resetting of options positions.

He believes that, due to extremely pessimistic market sentiment, supportive seasonal factors, and resilient retail capital flows, US stocks will experience a "tactical rebound" in mid-March, with the normalization of volatility as the key catalyst.

He emphasizes that despite ongoing geopolitical escalation, news related to AI disruption, and concerns about private credit, indices are still constrained by a "narrow corridor." The market is more driven by technicals and positioning than by one-way fundamental pricing.

The implication for the market is that short-term risk appetite may not come from new positive factors, but from a "lifting of constraints," especially changes in gamma structure around March options expiry, and once volatility compresses, more room for systematic funds to re-leverage. Here are the top ten reasons:

1. March Options Expiry Reaches Historic High

The options expiry on March 20 will be the month’s biggest technical event, with about 35% of US equity options exposure expiring. This will clear current gamma positions and break today’s mechanical anchors on indices.

Since the start of this year, the S&P 500 index (SPX) has had a peak-to-trough range of only 4.3% (the narrowest start in 20 years), with a lot of bullish option gamma accumulating around SPX 7000. This positioning has forced market makers to dampen gains, mechanically suppress rebounds, and limit subsequent momentum. Asymmetry appears on the downside—given less structural gamma support below, hedging flows may accelerate declines, creating a downward bias under an index originally "pinned."

By February, SPX cumulative daily absolute volatility reached 21.7%, but the index only rose +0.5% (absolute volatility is 44 times the return, at the 95th percentile for 40 years). After expiry, the market will gain much greater directional flexibility.

2. Retail Funds Continue to Support the Market

Retail investors remain the market’s most resolute force, with the scale and persistence of their buying activities (stocks and options alike) highly significant.

January 2026 saw the largest monthly net buying on Citadel’s platform in history, while February was the fifth largest (a new high since April 2021).

Retail dip-buying willingness is still the dominant force in 2026’s early capital flows. Year to date, on our platform, the average net notional trading volume on SPX down days is 2.5 times that of up days. Though February’s overall daily net notional trading volume slowed, dip-buying strength increased: in February, SPX down days had net notional trading volumes 4.3 times that of up days (vs 2.1 times in January).

Options participation remains structurally high. In 2026, retail average daily options trading volume surpassed 2025’s level by about 14%, and is nearly 47% higher than the 2020-2025 average—reflecting persistent engagement, not sporadic bursts.

The composition of this activity is also evolving. February data show volumes shifting toward the start of the week, with more Monday participation and less Friday activity. This coincides with the launch timing of zero-days-to-expiry (0DTE).

Retail still supports downside stability—but is not yet ready to drive decisive breakouts.

3. Tax Refund Funds About to Flow into the Market

Tax refund season is now becoming important and is highly correlated with flows into risk assets. Historically, refunds accelerate in late February and March, with February 22 typically the most active day. By March 1, only 30% of the annual refund total has been issued; most refunds will be paid within the next two months, hitting 75% by May 1.

This year’s refund volume is expected to be larger, and the seasonal pattern of money market fund liquidity aligns with this. Historically, net inflows to money market funds increase from February to March, indicating some refund-related liquidity initially accumulates in cash tools, then is redeployed.

This does not directly mean funds immediately flow into the stock market. However, high money market balances plus seasonal refund factors suggest incremental retail liquidity will be available in March.

4. Institutional Rule-Based Downside Protection Demand Surges

The S&P 500's 1-month skew is at the 96th percentile relative to the past year, with short-term implied volatility elevated. As risk premia are priced in, S&P 500 skew continues to steepen.

If global geopolitical tensions show any signs of cooling, clients will swiftly monetize protective positions, creating buy-side delta—this trait has increasingly surfaced in the past two trading days.

5. Cross-Asset Credit Hedging Demand High; Crude Volatility Extreme

Given tech sector volatility, cross-asset investors have added core credit product hedges. These remain among the most actively traded hedging tools on the desk. At February expiry, credit ETF hedging open interest hit a record high.

With this demand, bond market volatility has surged from January lows. Amid increasing geopolitical tension, crude oil volatility (OVX) soared, returning to early peaks seen when the Russia-Ukraine conflict started in 2022.

6. Macro Product Trading Volume Huge but Liquidity Thin

ETF, macro liquidity, and 0DTE options day-trading keep setting new records. Yesterday, ETF volume accounted for 47% of overall trading—highest in five years. This suggests investors are using ETFs for hedging, while retaining core exposure.

However, ability to transfer risk is limited; ES1 (S&P futures) top-of-book liquidity is only at the 4th percentile for the past two years.

7. Tech Stock Positioning Extremely Low, Could Trigger FOMO Rebound Anytime

If any upward catalyst emerges for tech stocks—and given sector volatility has begun to ease—it will rapidly turn into a FOMO-driven rebound, with investors rushing back in. High-quality stocks will outperform low-quality stocks. Buying will return to old leaders: quality tech stocks.

Given the information technology sector is 32.7% of the S&P 500, its performance remains crucial. Even if market breadth is strong—over the past 30 days, 67% of constituents have outperformed the index, which is the 98th percentile in 30 years—but with tech lagging, the index has not meaningfully risen.

Beneath the surface, the lightest-weighted S&P sectors have led, while the heaviest lag, so far this year the index is only down -42 basis points.

In fact, below the surface, the distribution of constituent returns is increasingly right-skewed, with a very high number of single stocks outperforming historically, especially so early in the year. However, these swings occur in lower-weighted stocks, limiting their contribution to the overall index.

Without tech participation, the index cannot achieve meaningful rebounds.

8. Volatility Normalization Will Trigger Reverse Flows

The volatility index is no longer just a sideline coach; it’s the quarterback. With elevated volatility, a mechanical deleveraging process occurs.

The VIX yesterday hit 28.15, highest since November, and spot prices are at deep discounts to near-month futures; S&P 500’s 1-month implied volatility is also at its highest since November (about 18v).

Once volatility compresses, it will create space for vol-target strategies, risk parity, and CTA strategies to systematically re-leverage and increase equity exposure.

9. Falling Correlations Benefit Stock Selection

1-month and 3-month implied correlations are at their highest since November 2025. The drop in implied correlation will suggest a weakening macro dominance, creating a more constructive environment for diversification and fundamentals-based stock picking.

10. March-April Seasonality Favors Bulls

Seasonal performance so far in 2026 is highly consistent with historical norms. Since 1928, March has typically been a slightly up month (61% probability of positive returns, average gain of about 53 basis points), followed by April, historically the second-best month.

Looking back to 1928, the S&P 500 has posted positive returns 61% of the time in March, with average gains of about 53 basis points.

Overall, despite macro concerns like geopolitical escalation and AI disruption, the market remains confined to a narrow range. Defensive positioning, thin liquidity, and the call option wall near SPX 7000 mechanically restrict volatility. With March options expiry approaching and volatility normalizing, the market is set for a tactical rebound; April will offer a longer-lasting window for re-risking.

Risk Warning and DisclaimerThe market has risks; investment requires caution. This article does not constitute individual investment advice and does not consider the special investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article fit their particular circumstances. Investments based on this are at your own responsibility.