The coronavirus outbreak is sparking extreme demand for market protection, according to XFA’s Bill Looney.
Looney, who runs the firm’s global business development, finds options traders are placing call strikes on the Cboe Volatility Index at a fever pitch as new virus cases surge.
“The VIX alone trades forward implied volatility. So, when you buy deep out-of-the money calls, you’re basically betting on a disaster kind of move which we’re somewhat seeing now,” Looney told CNBC’s “Trading Nation” on Tuesday. ”[It] becomes a form of portfolio insurance.”
