Goldman Sachs Trading Executive: Why I Chose Not to Chase Gains During the Index Surge
The ceasefire agreement in the Strait of Hormuz has driven a sharp market rebound, but the head of Goldman Sachs Delta-One business has bluntly said "not chasing the rally" and took the opportunity to reduce positions.
With the two-week ceasefire confirmed, Nasdaq and small-cap stocks jumped significantly, with gains exceeding the benchmark expectations previously set by Goldman Sachs Delta-One business head Rich Privorotsky.
Privorotsky believes that this round of gains looks more like a technical rebound from short covering rather than a substantial improvement in fundamentals. The S&P 500 has recovered about two-thirds of its previous decline, and European stocks are showing an even more excessive rise—he estimates that a "reasonable" gain should be between 2% and 3%, not the actual 5% recorded.
Meanwhile, the fragility of the ceasefire agreement itself and Iran’s ambiguous statement on controlling passage through the strait both constitute potential risks.
Ceasefire Agreement: Optimism and Pessimism Coexist
Privorotsky divides the market significance of this ceasefire news into two.
The optimistic interpretation: It marks the beginning of the end of the conflict, with each side finding its own political "winner" narrative framework and formally sitting at the negotiating table during the two-week window.
The pessimistic interpretation: The substantive positions of both sides remain far apart. Iran’s conditions include insisting on its uranium enrichment rights and establishing some form of "transit fee" collection and controlling mechanism in the Strait of Hormuz, possibly involving joint participation with Oman—which is extremely hard for the US to accept.
For the market, the subtle differences in these details do not matter. The truly key variable is only one: Whether tankers can pass through the Strait of Hormuz, and the speed and scale of such passage.
Iran’s “Toll Station”: Controlled Supply, Oil Price Unlikely to Return to $80
Iranian Foreign Minister Abbas Araghchi posted on social media: “Within two weeks, coordinated by Iranian armed forces and considering technical limitations, safe passage through the Strait of Hormuz will become possible.”
Privorotsky’s interpretation of this statement is straightforward: tankers must pass Iranian "toll station" approval to transit, and "technical limitations" mean throughput will be actively controlled—enough supply to avoid escalation, but not enough that Iran loses bargaining chips in negotiations.
This judgment supports his basic view on oil price trends: International crude sustains in the $90 range, not falling back to the $80 range. However, he also points out there will be heavy unwinding of underwater hedges and commodity trading advisor (CTA) long positions, forming temporary selling pressure.
Technical Side: Short-covering Drives the Rally, Positive Gamma Slows Further Gains
In the stock market, the structure of this rebound confirms Privorotsky’s earlier judgment about an asymmetric setup: overall position levels are high, net positions are low, investors generally hold too much index hedging, resulting in a large amount of short futures contracts needing to be covered.
The mechanical buying of CTA strategies has now been triggered and is expected to persist for some time. Volatility compression further adds a tailwind.
According to SpotGamma data, near 6800 on the S&P 500 index there is about $10 billion of concentrated positive gamma (in the historical 85th percentile). Positive gamma will create resistance for further upward movement of the index, quick profits will be taken, and the market will gradually shift to a period of consolidation with index volatility declining further.
Risk: Fragile Ceasefire, Overpriced European Stocks, New Highs Unlikely
Privorotsky clearly indicates that chasing the rally at current levels is not a good trade.
First, the ceasefire is inherently fragile. He notes that overnight there were already airstrikes in the Gulf, although this may be a "lagging effect," but the divisions over proxy conflicts (such as Lebanon-Israel friction) leave plenty of room for the agreement to collapse.
Second, the final market gauge is only one: the actual tanker flows through the Strait of Hormuz, and this data needs time to verify.
Third, European stocks have risen excessively, already feeling "overdrawn."
For future market direction, Privorotsky believes three variables need to be observed in resonance: interest rates, credit spreads, and oil prices.
Of these, interest rates carry the most weight, not only depending on oil price trends, but also on what level oil finally stabilizes. As for credit spreads, the rapid fading of tail risk hedging will bring a positive signal, but its near-term reference value is limited. Volatility compression links all of this together, together deciding reasonable spot pricing.
His final conclusion is: If oil prices structurally remain above pre-war levels, this rebound looks more like a mechanical technical correction than a trend move worth chasing. His trading choice is to sell part of his long positions during this sharp rally, not to follow up with more buying.
Risk Warning & DisclaimerThe market carries risks, and investment should be prudent. This article does not constitute personal investment advice and does not take into account individual users’ specific investment objectives, financial situations or needs. Users should consider whether any opinions, views or conclusions in this article are suitable for their particular circumstances. Investment is at your own risk.