Traders Rekindle Taste for Volatility Trading in Latest VIX Jump

(Bloomberg) -- The awakening of market turmoil has revived a penchant for volatility trading.

The number of VIX options and futures changing hands hit the highest level since February on Wednesday as the index jumped 44 percent, the most since its record spike on Feb. 5, according to data compiled by Bloomberg. At the same time, an exchange-traded product that gains with the volatility gauge was the second-most active ETP on U.S. exchanges as more than 116 million of its shares traded.

Traders Rekindle Taste for Volatility Trading in Latest VIX Jump

Volatility has returned to the stock market amid concerns ranging from the impact of the recent runup in Treasury yields to the sell-off in technology shares and the future of corporate-earnings growth. That may be catching some traders off guard: the latest hedge-fund data show large speculators are the most short Cboe Volatility Index futures since last November, and Societe Generale SA warned this week investors should reassess their hedges.

As Asian markets opened on Thursday, volatility was omnipresent. In Japan, a gauge tracking swings in the Nikkei 225 Stock Average surged as much as 50 percent -- more than Wednesday’s VIX rise.

While traders are hedging against turbulence, one measure shows they’re not worried about an extreme sell-off -- yet. The Cboe Skew Index, which measures the cost of tail-risk protection, has fallen the past four days, hitting on Wednesday its lowest level since May.

©2018 Bloomberg L.P.