The SPY Flies Higher, Options Traders Look The Other Way

The SPDR S&P 500 SPY gave traders a scare on Friday when the ETF gapped down and closed the day almost 2% lower. The SPY made a bearish double top pattern on June 14 and 15 at a new all-time high of $425.46 and then fell in consolidation.

The drop was accelerated on June 16 when the Federal Reserve raised its inflation expectations and spooked the markets.

On Monday morning, the SPY was trading over 1% higher but that didn’t stop institutions from purchasing almost $3 million in put contracts. The options traders may be betting the SPY is about to create a bull trap and head lower or they may be using the SPY to hedge other bullish positions they own.

See Also: 5 Things You Might Not Know About Federal Reserve Chair Jerome Powell

Why It’s Important: When a sweep order occurs, it indicates the trader wanted to get into a position quickly and is anticipating an imminent large move in stock price. A sweeper pays market price for the call option instead of placing a bid, which sweeps the order book of multiple exchanges to fill the order immediately.

These types of call option orders are usually made by institutions, and retail investors can find watching for sweepers useful because it indicates “smart money” has entered into a position.

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

At 9:30 a.m., Monday a trader executed a put sweep near the ask of 1,146 SPY options with a strike price of $390 expiring on June 30. The trade represented a $76,782 bearish bet for which the trader paid 67 cents per option contract.

At 9:37 a.m., a trader executed a put sweep near the ask of 300 SPY options with a strike price of $420 expiring on June 21. The trade represented a $106,200 bearish bet for which the trader paid $3.54 per option contract.

At 9:40 a.m., a trader executed a put sweep near the ask of 241 SPY options with a strike price of $414 expiring on June 25. The trade represented a $57,840 bearish bet for which the trader paid $2.40 per option contract.

At 9:42 a.m., a trader executed a put sweep above the ask of 1,654 SPY options with a strike price of $404 expiring on June 25. The trade represented a $140,590 bearish bet for which the trader paid 85 cents per option contract.

At 9:42 a.m., a trader executed a put sweep near the ask of 222 SPY options with a strike price of $405 expiring on July 16. The trade represented a $106,200 bearish bet for which the trader paid $3.87 per option contract.

At 9:44 a.m., a trader executed a put sweep near the ask of 200 SPY options with a strike price of $417 expiring on June 30. The trade represented a $84,600 bearish bet for which the trader paid $4.23 per option contract.

At 9:45 a.m., a trader executed a put sweep near the ask of 200 SPY options with a strike price of $417 expiring on June 30. The trade represented a $82,600 bearish bet for which the trader paid $4.13 per option contract.

At 9:48 a.m., a trader executed a put sweep near the ask of 250 SPY options with a strike price of $416 expiring on July 16. The trade represented a $106,200 bearish bet for which the trader paid $6.45 per option contract.

At 9:51 a.m., a trader executed a put sweep near the ask of 200 SPY options with a strike price of $423 expiring on July 2. The trade represented a $149,800 bearish bet for which the trader paid $7.49 per option contract.

At 10:02 a.m., a trader executed a put sweep near the ask of 300 SPY options with a strike price of $418 expiring on June 30. The trade represented a $111,300 bearish bet for which the trader paid $3.71 per option contract.

At 10:06 a.m., a trader executed a put sweep near the ask of 200 SPY options with a strike price of $420 expiring on Sept. 17. The trade represented a $281,600 bearish bet for which the trader paid $14.08 per option contract.

At 10:07 a.m., a trader executed a put sweep near the ask of 300 SPY options with a strike price of $414 expiring on July 14. The trade represented a $134,700 bearish bet for which the trader paid $4.49 per option contract.

At 10:07 a.m., a trader executed a put sweep near the ask of 500 SPY options with a strike price of $416 expiring on June 30. The trade represented a $104,000 bearish bet for which the trader paid $2.08 per option contract.

At 10:16 a.m., a trader executed a put sweep above the ask of 1,206 SPY options with a strike price of $380 expiring on Dec. 31. The trade represented a $1.39-million bearish bet for which the trader paid $11.59 per option contract.

SPY Price Action: The SPDR S&P 500 was trading up 1.22% at $419.99 at last check Monday.