VIX Call Options Increase by 275,000 Contracts, Wall Street Prepares for Market Decline

As the upward trend in the U.S. stock market slows down, Wall Street investors are strengthening their hedges against falling stock prices. Rising U.S. interest rates and high oil prices are putting pressure on the stock market, and the Federal Reserve's interest rate decision this week is expected to be a key variable. Recently, there has been an increase in the buying of Chicago Board Options Exchange (CBOE) Volatility Index (VIX) call options and Standard & Poor's (S&P) 500 put options. The S&P 500 has been moving within a range since the end of May, and the traditional pattern of increased volatility in a declining market has weakened. Some investors are turning to structured products that generate profits in a situation where both stock prices and volatility are low. Currently, the VIX is around 15.5, below the recent four-year average, and the volatility risk premium is near the upper end of the range since 2022. The market is focused on the Fed's interest rate decision and the trend of long-term Treasury yields, and the recently purchased VIX call options have exceeded 275,000 contracts. This reflects a movement to prepare for the risk of a sharp decline.

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