It's puzzled derivatives traders on Wall St for months. A buyer regularly steps into the options market for insurance against excessive stock market volatility and snaps up millions of contracts worth half a dollar each, leading to the buyer being dubbed "50 Cent".
The buyer has now been identified by the Financial Times as Ruffer Investment Company, a $21bn investment fund co-founded by Jonathan Ruffer and Viscount Tamworth, Robert Shirley.
Vix call options
The trade focuses on so-called call options on the US Vix, the Chicago Board Options Exchange's Volatility Index.
Vix measures the US stock market's expectation of volatility over a rolling 30-day period – the higher the level of implied volatility on the index, the more severe stock market losses are likely to be.
Reporters at the FT cited a number of unnamed sources who spotted an unusual trading pattern. The trader would regularly enter the market and buy call options that always cost around 50 cents, building up a total position of $120m.
A call option is a contract between two parties, giving the investor the right to buy an asset at a pre-determined price - the strike price - at any time until the expiration of the contract. The investor profits when the value of the contract's underlying asset moves higher. The investor then buys the asset at the strike price and sells to the broker at the higher price.
Ruffer's strike prices were mostly around the Vix index level of 20, a mark that has only been breached four times since the start of 2016. During much of the last six months the Vix has remained below 15.
The managers who run Ruffer's portfolio have shown signs over the last few months of becoming increasingly cautious about the prospects for US equities, in spite of most indexes trading close to record levels.
Interest rate protection
Steve Russell, Hamish Baillie and Duncan MacInnes say in Ruffer's April report that they have increased the interest rate protection on the portfolio, becoming more cautious after the Federal Reserve started its latest cycle of rate increases – its first since 2004.
The managers are also cautious about the business-friendly agenda of President Trump. They say, that while investors have reacted positively to policy proposals, the market will soon need to see proof of success of these policies before further trading landmarks are achievable.
Trump reforms must deliver
They said in last month's report: "We worry about an air pocket in which Trump's reform and fiscal easing remains stymied whilst markets have to start reacting to the first Fed hiking cycle since 2004.
"For this reason we have increased our interest rate protection to the extent that we have a negligible net portfolio duration today."
During January the trust cut back its equity exposure to about 38% of net assets, taking profits in Qualcomm, Microsoft, Conviviality and Oracle.
In addition to the Vix call options, Ruffer holds other hedges against the possibility of a reversal in equity markets. These include index-linked bonds and gold to protect against economic weakness, inflation and negative real interest rates.
The $120m Vix trade is a large position, representing about 8.5% of listed or exchange traded call options, according to the FT's sources. However, in terms of Ruffer's $21bn of assets under management, it represents a very small fraction.
Meanwhile, of the $120m spent on the call options, $88m worth have so far expired because of the Vix index's lack of volatility this year.