VIX Calls Most Shunned Since 2012 As Volatility Ignored
(Bloomberg) — Even with stock swings nearly doubling since 2014 and U.S. equities poised for their worst month in a year, traders aren?t signaling too much concern.
Investors own about 2.4 million options betting on a rise in the Chicago Board Options Exchange Volatility Index, compared to about 1.6 million contracts wagering on a drop. That?s around the lowest ratio of calls to puts in more than two years, data compiled by Bloomberg show, indicating traders don?t anticipate an increase in market turbulence anytime soon.
Traders have abandoned options betting on jumps in the VIX since November, even as the gauge spiked at least 18 percent three times this month. Stocks? tendency to power past declines at the end of 2014 encouraged traders to shed hedges and speculative bets in VIX options they weren?t profiting from, according to Todd Salamone of Schaeffer?s Investment Research Inc.
?We?ve seen a massive drop-off in call open interest,? Salamone, senior vice president at Cincinnati-based Schaeffer?s, said by phone. ?There?s been the lack of a big selloff or major volatility pop that hasn?t been short-lived, which could be responsible for that.?
Individuals use VIX options as a tool to protect their stock holdings from losses or to speculate on increases in market stress. The VIX moves in the opposite direction of the Standard & Poor?s 500 Index about 80 percent of the time.
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