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Options Trader Makes $3.78M Bet The Top Is Nearby For SPY

When SPDR S&P 500 (NYSE: SPY) made a new all-time high of $422.82 on Friday, one institution decided the top must be nearby.

05/07/2021 16:04

When SPDR S&P 500 (NYSE:SPY) made a new all-time high of $422.82 on Friday, one institution decided the top must be nearby.

The SPY Option Trade: Below is a look at the notable options alert, courtesy of Benzinga Pro:

  • At 1:33 p.m., a trader executed a put sweep, near the ask, of 2,750 SPY options with a $375 strike price expiring January 2022. The trade represented a $3.78 million bearish bet for which the trader paid $13.24 per option contract.
  • The January 2022 expiry date gives this options trader eight months to be right — that SPY will make a bearish move, which is likely in terms of how the market moves.
  • The $375 strike price is interesting because to reach it, SPY would need to drop just over 10% from its current price. Ten percent is considered to be a healthy correction in the largest ETFs such as SPY and the Nasdaq 100, so there is a good chance it could happen before January of next year.

See Also: Understanding SPDR S&P 500's Unusual Options Activity

SPY does not need to complete a full drop to that $375 area for this options trader to make a profit on his position. Even a 5% drop would return a massive profit for this trader as long as it happens in the nearer term. Options decay, meaning their price decreases over time, and the closer the market moves towards January before SPY retraces, the less value this trader’s option will have.

SPY Price Action: SPDR S&P 500 was trading up 0.84% at $422.55 at last check Friday afternoon. 

(Photo by Alfred Aloushy on Unsplash)