$VIX calls double

Bullish bets on the CBOE Volatility Index have doubled today.

On Jan. 16, Market Rebellion’s Unusual Avtivity tracking systems cited the purchase of 100,000 19February 22 calls for $0.47 to $0.48 with the underlying at 12.16. There was an outstanding open interest of just 75,950 contracts before the trade, indicating that this was a new position.

Those calls traded for as much as $1.15 today, more than twice times their purchase prices. The underlying rose 52.3% 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 spiked higher this morning to open with the market at 19.02 but has since edged lower, last up by 17.58% to 17.12. The index, which does not have a dollar value and trades inversely to the S&P 500, has spiked as equities decline.