What Was Behind The Brutal Selloff: Goldman's Trading Desk Explains

Was it a flurry of 0DTE option trades, was it a huge "put butterfly", was it a late session headline that spooked the market amid ghastly year-end liquidity, or was it just pent up hedge fund losses finally culminating in a burst of post-margin call liquidations?

One thing is clear: everyone wants to know what happened today that led to a brutal last 90 minutes selloff; certainly Goldman's clients do (at least those who aren't skiing or chilling in the Caribbean right now), because as Goldman trader Mike Washington writes in his EOD wrap (available to pro subs in the usual place), it was a "quiet start to the day that took an aggressive turn to the downside in the afternoon. We received a countless number of questions on the move lower (in part I think speaks to how long investors have gotten) without a clear smoking gun on the move."

UBS trader Andrea Scemanenco also chimed in, and wrote after the dust had died down that "SPX started as another calm rally morning turning into a random >1.5% selloff with a bid to vols and a lot of confusion on Wednesday. Any guess seems as good as any other with speculations of market getting too long, macro comments in the Middle East, a 0dte options print, among many others. In any case, this unexplained move with vols 8.5 is wild. The day closed with term structure flatter, skew unchanged and vols up."