Jan. 17 (Bloomberg) — Wagers that the VIX will increase reached an all-time high as investors prepare for U.S. stock volatility with the beginning of the earnings reporting season.

There were a record 7.82 million calls outstanding on the Chicago Board Options Exchange Volatility Index yesterday, according to data compiled by Bloomberg. Bullish VIX options outnumbered bearish ones by the most in 10 months with a ratio of 3-to-1. The volatility gauge, which tends to rise when stocks fall, has lost 10 percent in 2014.

Investors are positioning for equity volatility with the S&P 500 capping a new record this week and 200 companies in the index getting ready to release fourth-quarter results in the next two weeks. Forecasts for a stock-market decline are increasing as the S&P 500 has gone 27 months without a drop of 10 percent or more.

“We’re willing to give up a little bit of upside to go out and buy some insurance for the portfolio,” Peter Sorrentino, a senior portfolio manager who helps manage about $14.8 billion at Huntington Asset Advisors in Cincinnati, said in a Jan. 15 phone interview. “There is definitely a certain amount of psychology holding up the market at this level. As psychology turns, you can definitely get a downdraft.”

Sorrentino said his firm recently bought puts on the S&P 500 and calls on the VIX.

Earnings Season

The U.S. equity benchmark was little changed at 1,840.71 as of 10 a.m. in New York as United Parcel Service Inc. slid and investors weighed earnings at companies from Morgan Stanley to General Electric Co. The S&P 500 trades at 15.6 times the estimated earnings of its members, more than the five-year average multiple of 14.1, data compiled by Bloomberg show.

The VIX slipped 1.1 percent to 12.39. There were 2.52 million puts outstanding on the gauge on Jan. 16 before expiration on Jan. 22.

The VIX is calculated using the implied volatility of S&P 500 options expiring over the next 30 days. It is often used as a hedge for stock investors because it moves in opposite direction of the S&P 500 about 80 percent of the time.

Seven companies in the S&P 500 including GE and Morgan Stanley reported financial results today. Per-share profit for companies in the benchmark probably climbed 4.9 percent in the fourth quarter, while sales increased 1.8 percent, according to analysts surveyed by Bloomberg.

The VIX soared 53 percent from May 21 to June 20, reaching a six-month high of 20.49, after Federal Reserve Chairman Ben S. Bernanke said the central bank could consider reducing the pace of Treasury and mortgage debt purchases over the next meetings. The S&P 500 slipped 4.9 percent and emerging-market stocks fell 13 percent during the period.

“A lot of people are getting ready for higher volatility,” Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research in Cincinnati, said by phone on Jan. 16. “The VIX has become the preferred instrument for hedging.”

To contact the reporters on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net ; Lu Wang in New York at lwang8@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net