Hedge funds bets on calm in Wall Street volatility at highest level since 2022

A notable calm prevailed in US stock markets, prompting hedge funds to ramp up their bets on continued declining volatility, reaching the highest levels since 2022.

According to data from the US Commodity Futures Trading Commission (CFTC), the net short positions of hedge funds and major speculators on contracts tied to the VIX index reached about 92,786 contracts in the week ended Aug. 19 — the highest level since September 2022.

Chris Murphy, co-head of derivative strategy at Susquehanna, said these aggressive bets against the VIX suggest either strong confidence or potential complacency among traders.

In a statement to Bloomberg, Murphy warned that any unexpected spike in volatility could surprise traders and cause significant losses.

Markets previously experienced a similar scenario in February, when the S&P 500 declined and volatility surged due to fears of a global trade war led by US President Donald Trump.