The top options trade through midday Thursday is a 46000-lot of SPY July 124 puts. It’s part of a July 109 – 124 – 129 put fly, sold at 33 cents, 23000X. Shares are down 97 cents to $130.79 and the body, or 124 puts, were sold and the best payoff from the spread happens if the ETF falls to that level through the expiration, which represents a 5.2 percent market decline over the next 50 days. Since the 129 – 124 leg of the spread is five points and 124 – 109 is a 15-point spread, the overall position is an unbalanced fly with risk of loss to the downside (breakeven at expiratoin is $118.67). Therefore, while the spread reflects bearish positioning on the S&P, it’s not a tail risk trade or in anticipation of another dramatic market decline through mid-July.
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Frederic Ruffy is a well-known trader, writer, and strategist who has spent years educating investors and creating intelligent, insightful, unbiased market observations that are frequently cited by the Wall Street Journal and other financial publications. As senior analyst, Fred provides frequent and regular notes and daily updates for activity of interest.