(Bloomberg) -- The “50 Cent” trader, who made a splash in the options market years ago, is likely back with another big bet on stock volatility.

In a transaction late Tuesday, someone paid 50 cents each for 100,000 call contracts, worth $5 million, betting that the Cboe Volatility Index will surge to 50 in May. Another purchase at the same strike price and expiry was fired out Wednesday, with 50,000 contracts snapped up at 51 cents apiece for $2.6 million in total. 

The trades brought flashbacks on Wall Street to the days when VIX calls were repeatedly acquired at, or close to, that price by an enigmatic trader, or traders, who earned the “50 Cent” moniker — a play on the stage name of rapper Curtis J. Jackson III. 

“It’s a sizable purchase. He’s made noise in the past,” said Alon Rosin, Oppenheimer & Co.’s head of institutional equity derivatives. “His success has been notable where people pay attention.” 

By one estimate, that kind of strategy made nearly $200 million in total profit from the start of 2017 to February 2018, when a prolonged period of calm was broken by a dramatic volatility implosion. 

The apparent return of “50 Cent” follows a year when hedging against stock-price swings with the VIX faltered. One popular protective trade of buying volatility calls, as shown by CBOE VIX Tail Hedge Index (VXTH), not only failed to hedge losses in 2022 but in many cases created additional ones. The index lost 26%, compared with a decline of 19% from the S&P 500. 

Now with the VIX hovering around 18, near a one-year low, expectations are building that the strategy of volatility hedging may start to work again.

“What I’ve noticed is every time the spot vol gets to a certain level where he thinks it’s a good floor, he’ll jump in and take a shot thinking that just one event or one scare will give him an opportunity to monetize it,” said Rosin. “This time he’s using May, a little further out to give him time, versus sometimes he’s been a little shorter duration.” 

There are signs that demand for protection in the volatility market is on the rise. On Wednesday, one trader bought 100,000 VIX call spreads maturing in June where one contract was sold at a strike of 40 to fund the purchase of another with an exercise price of 30. 

“These investors might not be confident in a stock market meltdown in the second half, but they might be adding exposure and see VIX at attractive levels compared to other hedges,” said Chris Murphy, co-head of derivatives strategy at Susquehanna International Group. 

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