CTA Unwinding of Nasdaq-100 Positions Largely Complete, BofA Says

Systematic funds known as Commodity Trading Advisers (CTAs) have largely completed the unwinding of their exposure to the Nasdaq-100, according to a recent note from BofA Securities. The de-risking follows a period of weakness for the tech-heavy benchmark, which saw three consecutive down sessions and a significant selloff.

Nasdaq Positioning Diverges

BofA's equity derivatives team highlighted a sharp divergence in trend signals between major U.S. indices in its weekly Systematic Flows Monitor.

• The short-term trend strength for the Nasdaq-100 has fallen to just 13%.
• In contrast, the trend strength for the S&P 500 remains much higher at 53%.

This dramatic reduction in CTA positioning means systematic flow risk in the Nasdaq is now more balanced, or "two-sided," than in recent weeks, the bank said. Should the market recover, these funds could begin to re-accumulate Nasdaq positions, potentially adding momentum to a rebound.

Broader Market Risks Persist

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While the Nasdaq has seen significant de-risking, positioning in other key equity indices remains heavily skewed to the long side. BofA noted that CTA exposure to the S&P 500, Russell 2000, and Euro Stoxx 50 is still "largely intact and still stretched long."

This creates a potential contagion risk for the broader market. If equities were to roll over, the still-crowded long positions in these other indices could trigger widespread systematic selling, amplifying a downturn.

Moves Across Other Assets

BofA also observed significant CTA activity in other markets. In fixed income, rising yields prompted trend followers to extend short positions in longer-dated U.S. Treasuries. In foreign exchange, the U.S. dollar's largest weekly loss since January led some CTAs to be stopped out of yen shorts amid suspected intervention by Japanese authorities.

In commodities, oil positioning is mixed, with faster models holding short positions while slower ones remain long. Gold shorts remain elevated, and CTAs may be accumulating long positions in copper, according to the note.