Options prices have fallen to a one-year low according to Goldman, in what may be an indication that big investors foresee a mild summer ahead.
"It appears that investors are expecting low volatility as we enter the summer months," the Goldman Sachs options research team surmised in a Thursday note.
Options prices are closely linked to expectations of volatility, since big moves increase the probability that an option will wind up granting gains to its owner.
As a simple example, consider a stock trading at $100, on which one is considering buying an option that shows gains if the stock rises above $110 in the next month, or one that gains if the stock falls below $90. What would make one more willing to buy those options — a perception that the stock will end the month at $100 no matter what happens, or a perception that the stock has equal chances of winding up at $50, $100, or $150?
Obviously the second condition makes getting paid off on that option more likely. For that reason, traders are fond of using options prices to mathematically derive volatility expectations.
Right now, those expectations are falling. This is probably due both to the low volatility experienced recently as well as a perceived lack of market catalysts (although it bears noting that the upcoming long weekend dampens volatility expectations as well).
"There's no movement out there," Susquehanna's head of derivatives strategy, Stacey Gilbert, observed Thursday on CNBC's "Trading Nation," perceiving a market that's in "wait-and-see" mode when it comes to potential catalysts like the June Fed meeting and the U.K. vote on whether to leave the European Union.
Erin Gibbs of S&P Investment Advisory says that a "sideways trend" is likely due to the lack of catalysts.
"I do think it's very unusual because we do typically have some uptick in volatility during the summer months," she said Thursday on "Trading Nation."
The lack of movement over the past few weeks has been notable. On Thursday, the S&P 500 experienced its fourth session with a move smaller than 0.03 percent out of the last 16 — something that's only happened once before over the past 20 years.