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On Wednesday, a big trader, perhaps the infamous trader know as “Fifty Cent” (named for his/her propensity to buy VIX call options worth 50 cents), bought some 261,000 VIX calls at the August 21st expiry 20 strike calls.
(The CBOE Volatility Index is called the stock market’s fear gauge, tracking the price of options on the S&P 500. When it goes up, the market usually goes down. These call options are not in the money until the so-called VIX pops more than 50% from here. So this is a big bet on a quick market downturn.)
As you can see, in blocks ranging from 110,000 to over 25,000 they bought those August calls for 33 cents up to 35 cents.
These calls hit 50 cents on Thursday, at one point representing a paper profit of $4.4 million.
Next, right away on Thursday a trader was back as our computers tracked the VIX September 24 calls traded in big blocks, starting with 46,752 contracts where two blocks of that size hit in the first hour of trade. A total on the day of 110,000 calls for 63 cents.
Clearly the trader is pressing her or his advantage as the VIX popped 9% midday Thursday.