of Nasdaq-100 It’s up 15% from July’s lows and 2% above June’s all-time high. of S&P500is trading at record highs after a two-month battle with soaring interest rates.
You might think resilience would get a lot of hype. Instead, the two biggest option trades recorded on Tuesday were tinged with skepticism.
in State Street SPDR S&P 500 ETF Trust (SPY)About an hour after the opening bell on Tuesday, someone traded a 100,000-lot put spread for a net price of $44 million, which included a $61 million purchase of a 655-strike put likely to expire in March and a $17 million sale of a 500-strike put with the same expiration.
This is a bearish bet that would be most profitable if SPY falls to $500, which is a 35% decline from current levels.
SPX Year to Date
“If you’re looking to hedge, these March options are the cheapest they’ve been in the past 90 days,” said Brent Koczuba of options analysis firm Spot Gamma. The volume is quite low.
CBOE VIX index At one point on Tuesday, it fell below 15. This means options are cheaper overall, but put spreads were the biggest trades in SPY on days when option volume was more than 20% higher than the 30-day average.
The large trade, which begins to pay off when the S&P 500 falls by more than 18%, was about four times larger than the next largest trade, a net $11 million call spread, according to SpotGamma data.
At the same time, even bigger deals were made in Meta’s options, even as the social media giant rose 20% last month and downloads of Meta’s personal assistant, Muse, soared.
With an expiration in January 2029 (the longest term contract offered in MetaOptions), it presumably bought back $89 million worth of 560-strike calls that someone had sold, while simultaneously opening a new position to sell $69 million worth of 700-strike calls on the same day.
Selling a call against a long position is standard procedure for many investors, but using an in-the-money strike with more than two years until expiration looks like something different.
“Meta trading may be a Bolgay doing some kind of arbitrage,” Kočuba said, admitting that the trade was a bit of a headache.
It’s worth pointing out that SPY’s large trades were largely contrary to the overall tone of options trading across the fund, according to the bar chart sentiment indicator, which measures the net direction of premiums in options trading.
“This could be due to bullish retail traders,” John Rowland, senior market strategist at BarChart, said in an email.
That’s not the case with Meta, where online sentiment was negative, according to the site’s data.
