Markets

S&P 500 fund draws large bearish trade

One investor is positioning for downside in the stock market, buying puts on the SPDR S&P 500 exchange-traded fund.

optionMONSTER's Depth Charge monitoring system detected the purchase of about 38,000 March 122 puts for $4.26, and the sale of an equal number of March 109 puts for $1.50. It resulted in a cost of $2.76 and has the potential to make 371 percent if SPY closes at or below $109 on expiration.

The SPY is down 1.13 percent to $125.06 in afternoon trading, tracking a move of the same size in the S&P 500. Every 10 points that the index moves represents $1 in the SPY.

The fund bottomed around $107.43 in October, so today's put spread is looking for the market to retest near those lows. The trade could be the work of an investor looking to hedge a long position in the S&P 500 or be an outright speculative bearish bet. (See our Education section)

The S&P 500 is pulling back today after hitting resistance at its 200-day moving average. It's been trapped below that key level since the market crashed over the summer.

Overall option volume in SPY is in line with average amounts so far today, despite activity in the broader market being less than half the normal amount.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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