Huge trade counts on SPY holding firm

optionMONSTER

The largest option trade of the day so far is a bet that the SPDR S&P 500 Fund will hold current levels in the next week.

optionMONSTER's tracking systems detected a single trade of 37,741 Weekly SPY 142 puts that expire next week. They were sold for $0.80, below the listed bid price at the time.

Although it is rare to see SPY option volume that is greater than open interest at any strike, we do see it from time to time in the newly released weeklies. In this case the open interest was just 5,396 contracts at the start of the session, so this is a new position.

The SPY is up fractionally at $143.05 this morning. The exchange-traded fund opened the session at $143.70 as the futures responded well to the employment report released in the pre-market.

The put seller is looking for the SPY to hold above $142 through the end of next week. The likely thesis is that short-term implied volatility is priced too high, which is suggested by the trade data. The 10-day historical volatility for the S&P 500 is less than 13 percent, while the implied volatility of those puts is 16 percent. (See our Education section)

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