Gundlach's DoubleLine purchased five-month put options on S&P 500

Jeffrey Gundlach, CEO of DoubleLine Capital, speaks during the Sohn Investment Conference in New York City, U.S., May 8, 2017. REUTERS/Brendan McDermid

NEW YORK (Reuters) - Jeffrey Gundlach's DoubleLine Capital purchased some five-month put options on the Standard & Poor's 500 Index a couple days ago as the CBOE Volatility Index .VIX fell to its lowest since December 1993.

“We lost money the first day we put on the trade, but now we are doing great. This is like free money,” Gundlach, who is known on Wall Street as the Bond King, said in a telephone interview on Thursday. “We are in a seasonally weak period for stocks, but more importantly, we think the VIX was really, really low. So the S&P puts are going long volatility.”

The CBOE Volatility Index, better known as the VIX and the most widely followed barometer of expected near-term stock market volatility, on Thursday spiked above 11 for the first time since July 11 while its true range, a measure of internal swings, shot to its highest since June 29.

“Now we wished we had done more,” said Gundlach, the chief executive officer at DoubleLine, which oversees $110 billion in assets under management. The put options on the S&P 500 translate into “going long volatility. The price is ridiculously low” on VIX, Gundlach said.

Gundlach said he still has exposure to gold and predicted gold prices would rise because "gold looks cheap compared to markets that have rallied a lot, including bitcoin and including Amazon AMZN.O."

Late Thursday, Amazon shares came under selling pressure, dropping more than 4 percent before paring losses, as the company reported a 77 percent slump in quarterly profit.

Reporting By Jennifer Ablan; Editing by Jonathan Oatis and Cynthia Osterman