Investors are piling into options tied to the Cboe Volatility Index (VIX), betting on a rare spike in volatility for US stocks. Despite the S&P 500 being little changed, trading activity has surged in VIX call options that expire in May, with volumes centered around strikes of 55, 65, and 75.
The VIX, known as Wall Street’s “fear gauge,” has rarely reached these levels. The recent surge in buying follows previous big purchases of US Treasury 10-year note futures options, which bet on a sharp drop in yields if recession risk increases.
This activity may be linked to a similar trade made by an entity in July 2024, when they purchased call options tied to 10-year future futures and realized a significant profit. The timing coincides with recent market movements, including a poor employment report and the Federal Reserve’s intra-meeting cut.
Source: https://sherwood.news/markets/massive-fear-trades-emerge-betting-on-rare-volatility-spike-in-us-stocks