$VIX call prices double

Bullish bets on the CBOE Volatility Index have turned huge gains today, rewarding option traders fast profits.

On Jun. 8, Market Rebellion’s Unusual Option Activity Service found the purchase of 95,000 20July 50 calls, as part of a complex bullish spread, for $0.42 to $0.54 with the underlying at 23.93. There was an outstanding open interest of just 30,907 contracts before the trade, indicating that this was a new position.

Those calls have traded for as much as $1.25 today, at least 2 times their purchase prices. The underlying rose 35.6% in the same time period, underscoring how options can far outperform their underlying asset.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

The VIX has spiked during recent session, but was last lower on the day by 5.10% to 31.27.