AAL

SPY Put Volume Ramps Up as Stocks Sell Off

SPY options traders have preferred puts over calls

Aug 18, 2017 at 9:38 AM
facebook X logo linkedin


Stocks took a turn for the worse yesterday, as anxiety surrounding the Trump administration and a terrorist attack in Barcelona stoked fear in the U.S. stock market. The S&P 500 Index (SPX) plunged 1.5%, while the SPDR S&P 500 ETF Trust (SPY) shed 1.6% -- their biggest losses since May 17. SPY options trading was brisk, too, with 4.71 million contracts traded, nearly two times the average daily volume and settling in the 98th annual percentile.

Most of the action occurred on the put side, with 3.17 million contracts traded, compared to 1.54 million calls. This put bias is nothing new for the exchange-traded fund, though, with 17.76 million puts currently open -- just 1 percentage point from an annual high -- compared to 7.38 million calls.

The soon-to-expire August series garnered the bulk of the attention, accounting for each of SPY's 10 most active options. According to data from the major options exchanges, new positions were purchased at the August 242, 244, and 246 puts, suggesting speculators are betting on even more downside for stocks today, with the front-month contracts set to expire at tonight's close. SPY was last seen trading at $242.62, down 0.2% today. 

Longer term, one options trader may have initiated a long straddle in the soon-to-be front-month series, betting on a big SPY swing in the next four weeks, regardless of direction. Specifically, it looks like 12,500 September 265 calls were bought for 2 cents apiece, while a symmetrical block of September 265 puts were purchased for $20.41 each, resulting in an initial cash outlay of $25.5 million (12,500 contracts * $20.43 net debit * 100 shares per contract).

This is the most the straddle player would stand to lose, should SPY settle near the strike at the close on Friday, Sept. 15, when the options expire. Profit, meanwhile, will begin to accumulate should SPY to topple the upper breakeven rail of $285.43 (strike plus net debit) -- nearly 15% above the ETF's Aug. 8 record high of $248.91 -- or continue to retreat beneath the lower breakeven point of $244.57 (strike less net debit).

The latter scenario would call for SPY to breach its 80-day moving average. This trendline contained yesterday's retreat, and the exchange-traded fund has not closed below here since Nov. 8, the day of the U.S. presidential election.

spy daily chart august 18

 

Two High-Octane Trade Ideas. One Simple Goal: Intraday Profits.

Dynamite Day Trading Signals delivers two same-day options trades every week — powered by proprietary intraday analysis and 43+ years of trading expertise.

But this isn’t just another stream of alerts.

It’s a structured plan with clear entry and exit points – designed for traders who want to act fast, trade smart, and wrap up gains before the closing bell.

No guesswork. No overnight exposure – Just two well-researched setups per week — whether you prefer buying premium or selling it.

And the results speak for themselves: subscribers have locked in +245.8% total profit over the last six months (since inception!).

👉 Start your one-month trial now for just $10, and be ready for the next trade alert.