The stock market's main fear gauge continued higher Tuesday and indicated growing uncertainty on Wall Street.
The Chicago Board Options Exchange Volatility Index held above 30, the traditional barrier that would indicate a high level of implied volatility for the Standard & Poor's 500.
While the index was down about 2 percent in early trading, it later moved higher as the stock market wobbled. Stocks and the VIX tend to move in opposite directions.
Traders recently have been betting the VIX will continue to rise.
One trader on Thursday bought 20,000 July VIX calls at the 45 strike and sold 55 strike calls for an overall premium of 42.5 cents in a trade that cost about $850,000 to execute. The net impact is that the VIX would have to beat the 45.42 level by the July expiration for the investor to make money. The VIX hasn't been past 40 since April 21.
"The last few weeks we've come under 30 and we've been under 30 as investors became more sanguine in their approach," said Andrew Wilkinson, senior strategist at Interactive Brokers. "This was a standout trade that went against the grain."
While there would be no direct correlation between such a huge trade like Thursday's and the actual VIX movement, the bet could be indicative of a shifting mood.
VIX options premiums have been generally drifting higher, with trading last week on July calls for a 35 in the index exceeding open interest. Implied volatility on the index also has risen sharply, also suggesting higher moves in the index and tougher sledding for stocks.