$VIX calls continue to work

Bullish bets on the CBOE Volatility Index have continued to price higher since they were opened just nine sessions ago.

On Jul. 25, Investitute co-founder Jon Najarian noted that Investitute’s tracking systems cited the purchase of 110,000 18September 24 calls in a few prints for $0.60 to $0.65. There was no outstanding open interest in the contracts before the trade, indicating that this was a new position.

Those calls traded for as much as $1.60 today, more than twice times their purchase prices. The underlying rose 85.71% in the same time period, underscoring how options can far outperform their underlying asset.

It is the second winning trade in the VIX in as many days.

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 ended the session higher by 32.82% to 23.39 today. The index, which does not have a dollar value and trades inversely to the S&P 500, has spiked as equities decline.