Huge bearish trade targets S&P 500
Chris McKhann | firstname.lastname@example.org
The SPX was down less than 2 points to finish the session at 1404.11. It has closed above 1400 for each of the last five sessions, something it did only at last April's highs. Shares have stair-stepped higher from the 2012 lows around 1280 set in early June.
The SPX contracts are the most widely traded index options. Yesterday's unusual trade came in the August Weekly options that expire in three weeks (the last August expiration).
A trader sold 20,000 of the 1340 puts for the bid price of $2.10 and, seconds later, bought bought 10,000 each of the 1370 and the 1310 puts for $5.60 and $1 respectively. The volume was more than open interest at all three strikes.
The trade is a put butterfly spread, which cost $2.40 to open. That amount is the most that they can lose if they hold onto the trade and the SPX is above 1370 or below 1310. (See our Education section)
If the SPX were right at 1340, the trader could make $27.60 in a very handsome profit/loss profile. That 1340 level is support for the SPX, last hit on July 24.