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.