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Traders bet on another late-August volatility spike

A trader works on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters

As volatility plummets, some traders are starting to bet things have gotten too quiet on Wall Street and turbulence will return to the markets as the summer ends.

A data study showed a volatility spike in the fall months has been the trend and also revealed certain types of stocks can still perform during such a time.

"We are entering a historically seasonal time when Volatility i.e. VIX tends to bottom and begin a strong seasonal uptrend," Roberto Friedlander, head of energy trading at Seaport Global Securities, wrote in a note to clients Tuesday.

"The VIX closed below 11.5; historically when we have had a VIX <12 in August there was almost a sure bet that the VIX will be higher three months out by more than 6 percent with a fair possibility of an outsized move," he added.

Kensho, a tool designed to quantify historical market events, confirms Friedlander's call. Historically, when the CBOE Volatility Index traded below 12 in August, the fear gauge was up an average of 21 percent three months later, according to data from Kensho.