VIX Surge to 150 Is Day's Biggest Options Bet for 'Fear Gauge'

(Bloomberg) -- Uncertainty about the upcoming jobs report pushed the Cboe Volatility Index, or VIX, to close above 30 on Thursday. And someone is wagering that it won't stop there.

Most Read from Bloomberg

  • Kremlin Lets State Media Tell Some Truths About Putin's Stalling War

  • Musk's Twitter Takeover Hits Snag Over Debt-Financing Issue

  • Biden Says Putin Threats Real, Could Spark Nuclear 'Armageddon'

  • Nord Stream Leaks Caused by Detonations in Sign of Sabotage

  • Trump Says US Agency Packed Top-Secret Documents. These Emails Suggest Otherwise.

Shortly before the market closed, a trader bet that the VIX could increase to 150 by late March. Through a series of block trades, the trader -- most likely one person, according to market participants -- bought 50,000 call options, paying $950,000. It was the most-active VIX options contract Thursday.

"It may be seen as a cheap way to hedge if we see another significant crash," said Michael Beth, director of trading at WallachBeth Capital. "While the contract has low delta now, if things move quickly, we can see the value of the contract significantly increase."

This kind of massive activity in contracts that are so far from being profitable is rare. In such an uncertain environment, traders tend to stick to short-dated options that aren't too far from being in-the-money. The highest the VIX has ever traded on an intraday basis was 89.53 on Oct. 24, 2008, according to Bloomberg data going back to 1990.

Between now and March 22 when the contracts expire, investors face a slew of potentially market-moving events, like four interest-rate announcements and six inflation prints. The buyer of the contracts could be in a situation where he needs to have a hedge that can serve as protection in a panic scenario, should one occur, according to Chris Murphy, co-head of derivatives strategy at Susquehanna International Group.

"This tail hedge doesn't need the VIX to actually get close to 150," Murphy said. "But if VIX and VVIX both spike, the value of these calls could grow five-10 fold just due to the Vega."

Most Read from Bloomberg Businessweek

  • The Massive Gas Field That Europe Can't Use

  • Even After $100 Billion, Self-Driving Cars Are Going Nowhere

  • 'I Am Energy': Inside the Bang Billionaire's Reeling Empire

  • Millions in Cryptocurrency Vanished as Agents Watched Helplessly

©2022 Bloomberg L.P.


More Related News

German Court Gives Nod to EU
German Court Gives Nod to EU's €800 Billion Pandemic Fund

(Bloomberg) -- Germany's top court dismissed two cases challenging the country's approval of the European Union's €800 billion ($839 billion) pandemic...

Malaysia Palm Growers to Lose $4.6 Billion on Labor Shortage
Malaysia Palm Growers to Lose $4.6 Billion on Labor Shortage

(Bloomberg) -- A chronic shortage of plantation workers in Malaysia may cost palm oil producers about 20 billion ringgit ($4.6 billion) this year, according ...

SKF Explores Sale of Aerospace Business After Cevian Push
SKF Explores Sale of Aerospace Business After Cevian Push

(Bloomberg) -- SKF AB is exploring a sale of its aerospace operations, according to people familiar with the matter, as the Swedish industrial group trims...

Ramaphosa Digs In Over Scandal With South African Governing Party
Ramaphosa Digs In Over Scandal With South African Governing Party's Backing
  • US
  • 2022-12-06 08:55:42Z

(Bloomberg) -- South Africa's governing party said it will instruct its lawmakers to reject an independent panel's report that President Cyril Ramaphosa may ...

ECB's Lane Confident Inflation Near Peak as More Hikes to Come

(Bloomberg) -- European Central Bank Chief Economist Philip Lane said consumer-price growth is probably near its zenith, while acknowledging that borrowing...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply


Top News: Economy