Jan 16, 2017 22:27:24

Investors are bracing for a massive stock-market selloff

Demand for February VIX calls with lofty strike prices has increased in the past week

If options traders are correct, stocks are in for a wild ride in February.

Demand for one-month call options tied to the CBOE Volatility Index, a popular gauge of stock-market volatility, has spiked in the past week, a sign that some are bracing for a sharp downturn following the inauguration of President-elect Donald Trump.

In that time, investors have purchased 250,000 VIX call options with a strike price at 21, and another 100,000 with the strike at 22, according to Brian Bier, head of sales and trading at Macro Risk Advisors, an options brokerage. The options cost roughly 49 cents per contract, Bier said.

By comparison, the CBOE Volatility Index VIX, -2.69%  was at 11.16 in midday trading on Friday as the Dow Jones Industrial Average DJIA, -0.03%  and the S&P 500 SPX, +0.18% were on track to record modest daily gains.