Catenaa, Sunday, October 18, 2026- BofA said that customer VIX call positioning has risen sharply and is approaching summer 2024 levels, highlighting broader demand for forward volatility.
Bloomberg News reported that relatively subdued market volatility had influenced the pricing of VIX call options. However, limited movement in VIX futures suggests that maintaining positions designed to benefit from sudden volatility spikes may be costly.
“The vol of vol, measured with the Cboe VIX of VIX Index known as VVIX, had been sitting around the weakest level of the past two years before jumping on Friday,” Bloomberg News said.
Despite these costs, some investors have continued purchasing options that benefit from rising volatility. Bloomberg reported that this positioning could amplify market movements if dealers holding offsetting short-call exposures are forced to increase their VIX futures purchases as volatility rises.
Bloomberg News said that this could exacerbate a sudden VIX surge as appeared to happen on past Friday, when the 6-point intraday increase in the volatility gauge exceeded the expected reaction to a nearly 1.5% drop in the S&P 500.
According to Bloomberg News, the strategists estimate a 10-point shock increase in front-month VIX futures could require dealers to buy the equivalent of 90% of daily VIX futures volume to remain delta neutral.
“It is only a matter of time before we get a significant crack in US equities, given risks ranging from rising sovereign yields and energy costs to the upcoming US midterm elections and a fraught geopolitical environment that seems to be deteriorating from an already-perilous position,” Jeremy Wien, Managing Partner at Moo Point Capital Management, told Bloomberg News, “Not to mention an AI ecosystem with substantial financing needs in the aforementioned rising-rate environment.”
However, Bloomberg News said that as long volatility traders learned in the run-up to the Volmageddon episode in 2018, volatility and vol of vol can remain unusually low for very long periods. VIX spikes are often brief, requiring a trader to be nimble to cash in.
All of which feeds the perpetual debate over whether it’s better to own VIX calls versus buying S&P 500 or Nasdaq 100 Index puts to protect against a broad market selloff.
“Because of an unpredictable spot/volatility relationship in which VIX may not necessarily spike during a selloff in equities — at least not as much as it has in prior years/cycles — I’d rather own SPX (or QQQ) puts than VIX calls here,” Wien told Bloomberg News.
