VIX Traders Are Piling Into Bets That Fresh Stock Pain Is Ahead

The call-put ratio on the $CBOE Volatility S&P 500 Index (.VIX.US)$ , jumped Wednesday to levels unseen for some two and a half years, driven by bets on fresh market turmoil.
With a cost measure of VIX options hovering near the lowest level since 2019, traders are likely taking advantage of what looks like cheap insurance against the next bout of market chaos.
The hedging activity stands out given the fact that the VIX, known as Wall Street’s fear gauge, failed to hit new highs since March even as the S&P 500 careened to fresh lows.
“VIX hedging hasn’t worked like you’d expect,” said Danny Kirsch, head of options at Piper Sandler & Co. “Implied volatility moves have been muted all year. It’s been a terrible hedge so far.”

Before this month, there were signs that professional investors were shunning equity options and instead flocking to stock futures to hedge positions.
Now, demand for options appears to be back.
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