Big put spread looks drop in the SPY
Chris McKhann | [email protected]
A trader bought 9,904 April 139 puts for the ask price of $2.31 and sold 19,808 April 127 puts for their bid price of $0.73, according to optionMONSTER's Depth Charge system. The previous open interest at each strike was under 4,000 contracts, so this is a new vertical spread.
The position cost $0.85 to open, which is the amount at risk if the SPY remains above $139, while the maximum profit would come right at $127 at expiration. At that point all of those April 127 short puts would expire worthless. (See our Education section)
It is rare for our scanners to pick up unusual trades in the SPY because of its enormous open interests, but this one stood out as the day's largest transaction in fund. This put vertical is also a ratio spread because one leg has twice as many contracts as the other.
The SPY closed yesterday at $147.08, up 0.8 percent on the day and just off a five-year closing high from mid-September. Shares were last around that $127 level at the June low.