Markets Are Betting There Is More Downside To Stocks

Wall Street shares ended lower on Tuesday, with the Dow, S&P 500 and Nasdaq indices down 2.38%, 2.81% and 3.95%, respectively.

On CNBC's "Options Action," Mike Khouw of Optimize Advisors said that “a huge trade took place” in the S&P 500 index.

A trader bought 9,375 of the July 3,950/4,550 collars at $52 per contract on average, Khouw mentioned. That represents a buyer of the 3,950 strike puts in July and seller of the 4,550 calls, he added.

Also Read: 20 Stocks Moving in Wednesday's Pre-Market Session

Check out S&P stocks that investors are shorting in the premarket.

“If you’re buying those puts, then obviously you think the damage is not done or at least there is considerable risk,” Khouw stated. The trader is betting $50 million that the S&P 500 index could fall well below 4,000 by July expiration.

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Posted In: Short IdeasOptionsMarketsMediaTrading IdeasCNBCMike KhouwOptimize Advisors
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