An investor bought $5.12 million in call options that will be profitable if the Chicago Board Options Exchange Volatility Index (VIX) jumps at least 50 percent in the next four months.
The trader purchased 40,000 April calls on the VIX with a strike price of 22 for $1.28 each, according to Trade Alert LLC. The bullish volatility bet was the biggest single block of options to change hands on U.S. exchanges, the research firm said. The VIX rose 0.8 percent to 15.54 today.
Investors are positioning for a possible jump in volatility with stocks poised for the biggest annual advance since 2003 after the Federal Reserve refrained from reducing monthly bond purchases. The central bank may begin reducing its $85 billion of monthly bond purchases at its Dec. 17-18 meeting, according to 34 percent of economists surveyed Dec. 6 by Bloomberg, up from 17 percent in a Nov. 8 poll.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.