VIX tops 22 as AI stock selloff drives heavy options volume

The Cboe Volatility Index (VIX) closed above 22 for the first time in four months, driven by a sell-off in artificial intelligence-related equities. This move marks a significant shift in market sentiment, with trading data indicating that investors are positioning for further volatility.

Specific options activity highlights this trend. One trader purchased 9,200 November 18, 20-strike VIX calls for $1.7 million and 12,500 November 18, 23-strike calls for $1.1 million. These positions wager that the VIX will close above 23 by the third week of November. Brent Kochuba, founder of SpotGamma and a CNBC contributor, stated that the rapid increase in the VIX, combined with elevated options volume, suggests traders are monetizing October positions to hedge against a larger market downturn. He noted several call prints exceeding $1 million for November contracts.

The underlying equity weakness was concentrated in the AI sector. CoreWeave, a neo-cloud provider, fell 13%, contributing to the Nasdaq losing 2%, its worst single-day performance since June 5. In Friday's session, nine of the ten most popular VIX contracts to buy were calls. Six of these were at strike prices above the index's level after its initial spike. Nearly $27 million in premium was traded across these nine contracts, representing approximately 36% of the total premium traded in VIX options on the day.

Market attention turns to next week, when Tesla, SpaceX, and Meta report earnings. These results will serve as a key test for market stability following the recent volatility.