Managing Director, Royal Bank of Canada
Amy Wu Silverman (Monday 4/29/2024)
About Amy Silverman
Amy Wu Silverman, managing director and head of derivatives strategy at RBC Capital Markets, appeared on financial news programs in April 2026 to discuss market volatility and institutional investor behavior. On April 17, she commented that the VIX had fallen to its lowest level in more than two months, stating that "we've learned to look through geopolitics" and that investors are applying the "2022 playbook" to current conflicts. She described the current environment as a "bargain basement" for put options, noting that the cost of downside protection had decreased. Silverman also said she would buy the "Mag seven" stocks, adding that volatility on the QQQ appeared "relatively inexpensive" and that upcoming IPOs from companies like Anthropic and SpaceX could generate momentum. On April 7, Silverman said institutional investors are experiencing "headline fatigue" because "the headline isn't necessarily corresponding to the market action anymore." She observed that on days when the market sells off, investors take profits on their hedges, and when the market rallies, they fade positions, suggesting a trading-range mentality. Silverman added that despite the Iran conflict, institutional investors view the United States as "the cleanest shirt in a dirty pile" for capital allocation. She also noted that while the current earnings season may include some commentary on the war's impact, more significant discussion is expected in the following cycle, which will coincide with the midterm elections.
Transcript (14 segments)
✨ AI-enhanced transcript with speaker attribution
I
Interviewer0:00
Since the last time you were on, we have seen a little bit of a change in sentiment all over the place. Let's start though with the notion that volatility had caused some pretty big premiums in calls, and yet the actual moves on either way on some of these reports, the earnings that came out, were actually greater than what the increased call premiums had predicted.
A
Amy Silverman0:26
Yeah, that's exactly right. So last week was a big week obviously for Mag 7 names. This week will continue to be for Apple and Amazon. But you know, even though we had pretty big moves in something like Meta, something like Google, the options implied move going into that still didn't end up beating the realized move. So one thing we've been talking about is it actually still continues to pay to own volatility, even though it looks quite high going into these idiosyncratic risks. You're still kind of doing okay because the actual magnitude on these earnings, they matter so much to the stock, but they also matter so much to the market as a whole that you're actually benefiting from that volatility. And it'll be interesting because Apple and Amazon obviously are key ones for this week, and they're coming in a little bit fairer. It's almost like the market's starting to bake in the idea that probably last week's moves on Meta and Google were probably a little too inexpensive given what happened on earnings.
I
Interviewer1:18
There could be another surge in, I guess, interest or volatility with Nvidia though as well.
A
Amy Silverman1:23
I mean, Nvidia is just the poster child, Joe. I mean, this is the market's baby. And I think the last time we spoke, we were really at peak exuberance. I'm talking historic bid for demand for calls. Now, one thing that's interesting is that's waned, even though the AI talk arguably out of Google last week kind of suggested that there's more to run for the market as a whole. We haven't seen that call demand pick up. It's actually the first time we talk about being uninverted, meaning the call demand is no longer outweighing the put demand. So that's a very interesting sucking out of exuberance in the market for Nvidia, which essentially since May 2023 of last year has been hitting historic highs in terms of that right tail.
I
Interviewer2:05
Right tail, you is just a way that you're referring to bullishness or calls, and you're now saying that the left tail is, there's some interest there that wasn't there last time you were.
A
Amy Silverman2:19
Yeah, so you know, we refer to right tail and left tail because we kind of look at everything from a normal distribution perspective, that bell curve, if you will, of kind of the unlikely ends, but that they could happen. What's interesting is the left tail has really picked up. And one thing I want to make clear is it's not just because you've seen a sell-off in the market, because that has happened in the past where the left tail hasn't picked up. This is really kind of a unique circumstance. I think it's partly geopolitical, but I think it's partly because the market's also starting to price in left tails, like potential rate hikes, right? That's not something that we're baking in, but something that the tail event of that probability is starting to increase, and obviously other unknown unknowns in the market too.
I
Interviewer3:01
So in the past when it hasn't happened, it's because by the time people think I might want to hedge, they think it's already, that the move's already over. Is that what you...
A
Amy Silverman3:10
You know, the options market has been a little bit of a fail in the past few years. In 2022, we drew down 20%. A systematic put buying strategy, so owning puts on that market, drew down 21%. So meaning owning that hedging hasn't actually paid off. But even given that, the market's still starting to say maybe we should think about hedging, and that kind of tells you about the bubbling concerns I think that are in that left tail.
I
Interviewer3:32
And then what I notice is you actually are delving into the fundamentals world. You've got a lot of reasons why this is the case, right? And it has to do with what we're going to hear on Wednesday, which are they going to, they're going to at least admit that maybe there's no cuts this year.
A
Amy Silverman3:51
Well, you know, that is something that I will tell you the investors we have spoken to have been saying that since February. So even since before, you know, the next pivot that we had, that's something we've heard from equity investors, and that's why I think that left tail began to pick up. The second part is just the absence of the right tail being as strong as it has been. So people are being more picky about AI. I think last year was just about AI tide lifting all AI boats, and we're just not seeing that. It's really more specific, stock by stock, and investors are saying we need a little bit more proof, and you're really seeing that in the underlying betting, the options market not being as exuberant as it was.
I
Interviewer4:33
There's the Fed, but then you point out, you know, I think in six months, is it six months, do we have an election?
A
Amy Silverman4:40
Yeah, I think six months we have an election. And one candidate can't campaign because he's got to be in court. So half the country thinks this guy really needs to be in court and he actually needs to go from court to jail, and the other half of the country thinks the only reason he's in court is because he's being unfairly prosecuted by his political opponent. So you got to have, and that doesn't make for a good backdrop.
I
Interviewer5:05
It's amazing because, you know, the fact that we've just gotten to the part about the election, but I will tell you I think that underlying volatility, if you look at the VIX term structure, so just how VIX is pricing in the future, there's a really noticeable bump in November. It's the market saying, you know, we hadn't been thinking about volatility during elections, but wait a minute, this is really unprecedented in a lot of ways. And again, I think that's why this left tail has picked up, even though historically post-COVID it hasn't worked. We're still getting that worry, and that AI rally isn't enough this time to weigh it out.
Amy Silverman, thank you.