Some big investor made a $5.13 million options bet Thursday that April could be a cruel month for stocks.
A sizable trade in VIX options caught the eye of traders, who say it's one of the first big bullish trades on the Volatility Index for April and assumes a 50 percent jump in the index.
The VIX, the Chicago Board of Options Exchange's Volatility Index, is viewed as a fear gauge for the stock market. It estimates expected volatility by averaging weighted prices of S&P 500 puts and calls over a range of strike prices. A high VIX is viewed as bearish for stocks.
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According to Trade Alert President Henry Schwartz, on Thursday morning a single investor bought 40,000 April calls, with a strike price of 22, priced at $1.28 each.
The VIX was at 15.49 Thursday afternoon but had hit an earlier high of 16.09—the highest level since September. The VIX was last at 22 a year ago.
"We see a lot of these type of trades as an alternative to buying straight puts on something like the SPX [S&P 500]," said Schwartz. Investors betting on the VIX are hedged on volatility but not betting that the market necessarily goes down, as in an SPX put trade.
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"Certainly it kind of corresponds to some of the activity we've been seeing over the last month—even like a month ago, we saw big trades in February 20s and 21s," said Dan Deming, who trades the VIX at the CBOE. "But it is kind of unusual, given the fact that most of the activity we've seen in the last two days is in December and January because of the market showing signs of weakness."
Stocks have been rocky for the past three sessions, as traders increasingly speculate that the Fed will begin this month to pare back its bond purchases.
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Many Fed watchers have forecast the Fed would move first in March, but better-than-expected economic data, such as November jobs and retail sales, have traders thinking it could be sooner.
Schwartz said the VIX calls purchase was the largest options trade of the day.
—By CNBC's Patti Domm. Follow here on Twitter