Note: Citadel Securities is a market maker whose revenue depends on trading volume, so a forecast of rebounding activity is also a forecast about its own business. Readers should weigh the analysis accordingly.
- Cash equity trading volumes fell to 0.94 times their trailing one-year average in September, a low for 2026, with retail options premium at the same multiple, according to Scott Rubner, head of equity and equity derivatives strategy at Citadel Securities. Stock activity now sits 26% below its June high and options premium has shrunk by about a third from the 1.41 times reached then.
- Rubner argues the market enters the fourth quarter from a cleaner starting point with considerably more capacity to rebuild exposure, after positioning cleared and valuations fell. He describes September as having delivered much of the reset and the fourth quarter as the reload, with earnings and corporate buybacks returning.
- The seasonal case rests on a short record. Cash volumes rose between September and October in each of the last four years by an average of around 8%, while options activity rose in three of those years by roughly 15% on average.
- Other desks corroborate how quiet it has been. JPMorgan strategists led by Arun Jain called September the slowest month for cash equity trading since December 2024, with last week flows ranking in the 12th percentile.
What Happened?
Stocks finished September lower as concerns about inflation and higher rates weighed on sentiment, though Rubner characterised the pullback as healthy because it cleared stretched positioning. He cautioned that October could still prove volatile while offering a better entry point.
Why It Matters?
The positioning argument is the strong half of this note and it is independently corroborated. The American Association of Individual Investors reported a bull-bear spread of minus 24.5%, its weakest since May 2025, with more than half of respondents holding above-normal cash and 19.1% describing their cash as much higher than normal. Bitcoin open interest has fallen to its lowest since March, nearly 20% below August levels. Several unrelated measures agree that leverage and exposure have been cleared out, which does leave capacity to rebuild and is a reasonable basis for expecting flows to return. The seasonal half is considerably weaker and deserves scepticism. Four observations averaging an 8% volume increase is a small sample, and more importantly it measures trading activity rather than returns. Volumes rising means more transactions occur, not that prices go up, and a market maker has an obvious reason to focus on the former. Investors reading this as a directional call are reading in something the data does not support. The useful distinction for allocators is between capacity and conviction. Positioning has reset, which means a rally would face less resistance from forced selling, but the AAII data shows that cash is sitting idle because households are worried about rates and energy rather than waiting for a seasonal signal. What brings it back is a change in the macro picture, and on that front the softer inflation print that has reduced October rate hike expectations is more relevant than any volume pattern.
What Next?
Third quarter earnings are the catalyst Rubner names alongside the return of corporate buybacks, and the buyback window reopening is the more mechanical of the two since it supplies demand regardless of sentiment. Watch whether cash volumes recover from 0.94 times average toward the 1.41 times options multiple reached in June, as that is the measurable test of the reload thesis. The Federal Reserve meeting later this month matters more than seasonality, given that expectations of a hike have receded on softer inflation data. For the retail flow specifically, the AAII cash allocation readings are the better leading indicator, since money leaving cash shows up there before it shows up in volumes.
Affected Tickers and Coins: HOOD, SCHW, IBKR
Source: Bloomberg
