The Cboe Volatility Index rose above 22 for the first time in four months as AI-related stocks sold off. Options traders purchased a number of November VIX calls that pay off if the index stays elevated through November.
The sell-off in AI-related stocks pushed the Cboe Volatility Index above 22 for the first time in four months. A cluster of options trades suggests the VIX could climb higher.
Cracks in the AI complex and fears around neo-cloud provider CoreWeave caused the Nasdaq to shed 2%, its worst day since June 5th. CoreWeave lost 13%.
Traders buy November VIX calls
Investors purchased a number of November VIX calls that pay off if the index stays elevated through November. One trader bought 9200 of the November 18, 20-strike calls for $1.7 million and 12,500 of the November 18, 23-strike calls for $1.1 million.
That second position wagers that the VIX will close above 23 by the third week of November. Brent Kochuba, founder of SpotGamma and a CNBC contributor, noted several $1 million-plus call VIX prints for November.
Calls also featured in Friday's VIX activity. Of the top ten most popular VIX contracts to buy, nine were calls, and six sat at strikes above where the VIX fell after its initial spike. Those nine contracts traded nearly $27M in premium, about 36% of the total premium traded in VIX options on the day.
The market faces a key test next week when Tesla, SpaceX and Meta report earnings.
Source: CNBC
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