VIX Call Volume Hits Post-Brexit High

April options on the CBOE Volatility Index (VIX) expired yesterday, and traders rushed to replace or establish new positions in the May series. In fact, VIX call volume approached nearly 1.5 million contracts yesterday -- twice the daily average and the highest since just before the Brexit vote in early June. At the same time, just about 144,000 VIX put options changed hands yesterday -- lower than the average 244,000 traded -- resulting in the lowest put/call ratio in at least a year, at 0.10. Against this backdrop, and amid escalating geopolitical tensions and uncertainty surrounding the French elections, it seems speculators are either betting on or hedging against a volatility spike for stocks in the short term.

Digging deeper, VIX call volume topped 1 million contracts for two straight trading days -- something else we haven't seen since the pre-Brexit rush back in June. Prior to that, you'd have to go back to the stock market crash of August 2015. However, what's interesting is the VIX was much, much higher during both those stretches, trading around 20-21 in June and hitting a record close north of 40 in August 2015. The VIX is currently in the 14 neighborhood, though it recently sported its biggest year-to-date lead on record, and peaked in the key 16 area last week.

Most of yesterday's call volume consisted of mammoth spreads in the newly front-month May series. Simultaneous blocks of 200,000 May 30 and 35 calls traded out of the gate, alongside a block of 100,000 May 20 calls. Later in the day, another pair of 100,000-contract trades crossed at the May 30 and 35 calls. Open interest at all three of the aforementioned strikes skyrocketed overnight, with the May 20 and 30 calls home to peak open interest of about 566,000 and 552,000 contracts, respectively. The May 35 strike is in third place with more than 476,000 contracts outstanding.

Following what Schaeffer's Senior V.P. of Research Todd Salamone deemed a "pivotal" week for the market's primary fear gauge, the purchase of these out-of-the-money calls suggests those who are short VIX futures are not yet rushing to cover their short volatility positions, according to Salamone.