<p>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 catalyst being the decline in volatility and the reset of options positions.</p>
<p><strong>He believes that due to extremely pessimistic market sentiment, seasonal factors providing support, and the resilience of retail capital flows, U.S. stocks will experience a &#34;tactical rebound&#34; in mid-month, with the normalization of volatility becoming the core catalyst.</strong></p>
<p>He emphasized that despite ongoing geopolitical escalations, AI-related news impacts, and concerns over private credit, the indices remain constrained by a &#34;narrow corridor,&#34; and the market resembles a trading environment driven more by technical factors and positions rather than fundamental one-way pricing.</p>
<p>The implication at the market level is that short-term risk appetite may not necessarily stem from new positive developments, but rather from &#34;constraints being lifted,&#34; especially the gamma structure changes around the March options expiration, and the potential for systematic funds to re-leverage once volatility compresses. Here are the top ten reasons:</p>
<h2>1. March options expiration size reaches historical high</h2>
<p>The options expiration on March 20 will be the largest technical event of the month, with approximately 35% of U.S. stock options exposure set to expire. This will clear the current gamma positions and break the mechanical constraints currently anchoring the indices.</p>
<p>So far this year, the S&amp;P 500 Index (SPX) has had a peak-to-trough range of only 4.3% (the narrowest start in 20 years), accumulating a large amount of bullish options gamma around the 7000-point level. This positioning forces market makers to weaken the upward momentum, mechanically suppressing rebounds and limiting subsequent power. Asymmetry appears during declines—due to less structural gamma support below, hedging capital flows may accelerate declines, creating a downward bias beneath an index that is otherwise &#34;pinned.&#34;</p>
<p>As of February, the SPX's 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 over the past 40 years). After expiration, the market will gain greater directional flexibility.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/8b795bdc-9eb6-4772-af79-fdc20f688485.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/8b795bdc-9eb6-4772-af79-fdc20f688485.png"/></p>
<h2>2. Retail capital continues to support the market</h2>
<p>Retail investors remain the most steadfast force in the market, with significant scale and persistence in their buying activities (whether in stocks or options).</p>
<p>January 2026 saw the largest net buying month in the history of the Citadel platform, while February marked the fifth largest net buying month (the highest since April 2021).</p>
<p>The willingness of retail investors to buy on dips remains the dominant force in capital flows since early 2026. So far this year, on our platform, the average net nominal trading volume on days when the S&amp;P 500 index declines is 2.5 times that of days when it rises. Although the overall average daily net nominal trading volume in February slowed, the intensity of buying on dips increased: in February, the net nominal trading volume on days when the S&amp;P 500 index declined was 4.3 times that of days when it rose (compared to 2.1 times in January)
The participation rate in options remains structurally high. The average daily options trading volume for retail investors in 2026 is about 14% higher than in 2025 and nearly 47% higher than the average level from 2020 to 2025, reflecting sustained participation rather than intermittent surges.</p>
<p>The composition of this activity is also evolving. Data from February shows that trading volume is shifting towards the beginning of the week, with increased participation on Mondays and reduced activity on Fridays. This change coincides with the introduction of zero-day-to-expiration (0DTE) options.</p>
<p>Retail investors continue to support downside stability—but are not yet ready to drive a decisive breakthrough.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/490a73d3-a07e-4655-b18e-64058258e3cc.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/490a73d3-a07e-4655-b18e-64058258e3cc.png"/></p>
<h2>III. Tax Refund Funds Set to Enter the Market</h2>
<p>The tax refund season is becoming significant now, with a high correlation to the flow of funds into risk assets. Historically, tax refunds accelerate in late February and March, with February 22 typically being the most active day for refunds. As of March 1, only 30% of the annual tax refund total has been issued, with most refunds expected to be distributed over the next two months, reaching 75% by May 1.</p>
<p>This year's tax refund scale is expected to be larger, and the seasonal liquidity pattern of money market funds aligns with this. Historically, net inflows into money market funds increase during February to March, indicating that some liquidity related to tax refunds initially accumulates in cash-like instruments before being reallocated.</p>
<p>This does not directly mean that funds will immediately flow into the stock market. However, the higher balances in money markets combined with seasonal factors from tax refunds suggest that there will still be incremental retail liquidity available by March.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/553e4a1b-a615-43d0-81a5-19c2950f79f3.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/553e4a1b-a615-43d0-81a5-19c2950f79f3.png"/></p>
<h2>IV. Surge in Institutional Demand for Rule-Based Downside Protection</h2>
<p>The one-month skew of the S&amp;P 500 index is at the 96th percentile for the past year, with short-term implied volatility remaining high. As risk premiums are factored in, the skew of the S&amp;P 500 index continues to steepen.</p>
<p>If there are any signs of easing in global geopolitical tensions, clients will quickly monetize their protective positions and create buying Delta, a characteristic that has become increasingly evident in the last two trading days.</p>
<h2>V. High Demand for Cross-Asset Credit Hedging, Extreme Oil Volatility</h2>
<p>Given the volatility in the software sector, cross-asset investors have increased hedging of core credit products. These remain among the most actively traded hedging tools on trading desks. At the February expiration, the open interest for credit ETFs reached a historical high.</p>
<p>Accompanying this demand, bond market volatility has significantly increased from January's lows, and amid escalating geopolitical tensions, oil volatility (OVX) has surged back to the highest levels seen at the onset of the Russia-Ukraine conflict in 2022.</p>
<h2>VI. Huge Trading Volume in Macro Products, but Liquidity is Scarce</h2>
<p>Intraday trading of ETFs, macro liquidity, and 0DTE options continues to set new records, with ETF trading volume accounting for 47% of total trading volume yesterday, marking a five-year high. This indicates that investors are using ETFs for hedging while maintaining core exposure.</p>
<p>However, the ability to transfer risk is limited, with the top-level order book liquidity of ES1 (S&amp;P futures) only at the 4th percentile of the past two years.</p>
<h2>7. Technology stock positions are extremely low, potentially triggering a FOMO rebound at any time</h2>
<p>If there are any upward catalysts for technology stocks, given that the sector's volatility has begun to weaken, this will quickly evolve into a rebound led by &#34;fear of missing out&#34; (FOMO) as capital flows back into the sector. High-quality stocks will outperform low-quality stocks. The recovery of buying behavior will return to the old leaders: high-quality technology stocks.</p>
<p>Since the information technology sector accounts for 32.7% of the S&amp;P 500 index, its performance remains crucial. Even with strong market breadth—67% of constituents outperforming the index over the past 30 days, which is at the 98th percentile level over the past 30 years—the index has struggled to rise meaningfully in the face of underperformance from technology stocks.</p>
<p>Beneath the surface, the lightest-weighted S&amp;P sectors are leading, while the heaviest-weighted sectors are lagging, resulting in the index being down only -42 basis points year-to-date.</p>
<p>In fact, beneath the surface, the distribution of returns among constituents has become increasingly right-skewed this year, with a historically high number of individual stocks recording excess returns so early in the year. However, these fluctuations are occurring in stocks with smaller index weights, limiting their contribution to the overall index performance.</p>
<p>Without the participation of technology stocks, the index cannot achieve a meaningful rebound.</p>
<h2>8. Normalization of volatility will trigger reverse capital flows</h2>
<p>The volatility index is no longer just a sideline coach; it is the quarterback, and given the elevated levels of volatility, a mechanical deleveraging process will occur.</p>
<p>The VIX index reached 28.15 yesterday, the highest level since November, with spot prices showing significant backwardation relative to near-month futures, and the 1-month implied volatility of the S&amp;P 500 index also rising to its highest level since November (around 18v).</p>
<p>Once volatility is compressed, it will create space for volatility-targeting strategies, risk parity, and CTA strategies, prompting them to systematically re-leverage and increase equity exposure.</p>
<h2>9. Declining correlation will benefit stock selection</h2>
<p>The 1-month and 3-month implied correlations have reached their highest levels since November 2025. The decline in implied correlation will indicate a weakening of macro dominance, thereby creating a more constructive environment for diversified investments and fundamental stock selection.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/3ee332ec-4a21-4765-8b85-72a8dbc3bcc4.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/3ee332ec-4a21-4765-8b85-72a8dbc3bcc4.png"/></p>
<h2>10. Seasonal factors from March to April lean positive</h2>
<p>The seasonal performance in 2026 to date is highly consistent with historical norms. Since 1928, March has typically been a slightly rising market (with a 61% probability of positive returns, averaging an increase of about 53 basis points), followed by April, which has historically been the second-best performing month
Looking back to 1928, the S&amp;P 500 index recorded positive returns 61% of the time in March, with an average increase of about 53 basis points.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/5211845d-25af-4ee8-853c-4f16851be46e.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/5211845d-25af-4ee8-853c-4f16851be46e.png"/></p>
<p>Overall, despite facing macro concerns such as geopolitical escalations and AI disruptions, the market remains confined within a narrow range. Defensive positions, thin liquidity, and the bullish options wall around the SPX 7000 points mechanically limit market volatility. With the arrival of March options expiration and the normalization of volatility, the market is set to experience a tactical rebound, while April will provide a more sustained window for re-risking</p>

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<p>Citadel's Chief Strategist Scott Rubner presents ten bullish reasons: the large-scale options expiration on March 20 will break the Gamma shackles that have suppressed the index; retail investors continue to provide support for the market; incremental funds will soon enter during tax refund season; combined with a decline in volatility triggering systematic funds to re-leverage... He predicts that U.S. stocks will experience a "tactical rebound" in mid-month, and April will present a more lasting re-risking opportunity</p>

- Scott Rubner of Citadel has shifted from a tactical bearish to a bullish stance due to declining volatility and options repositioning.  
- He anticipates a tactical rebound in U.S. stocks this month, supported by extreme market pessimism, seasonal factors, and resilient retail investor activity.  
- The upcoming March options expiry and normalizing volatility are expected to enhance market flexibility, potentially leading to a sustained period of risk-taking in April.

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Citadel traders "flip from short to long": Ten reasons the market is set for a "tactical rebound"