Options Traders Feeling Market Fear Hammer The SPY Puts

The SPDR S&P 500 ETF SPY continued to pull back from its $437.92 all-time high on Friday. The SPY reached the record price twice on Tuesday and Wednesday this week, creating a bearish double top pattern.

The pullback has been attributed to inflation worries and increased spread of the COVID-19 Delta variant, but for bullish investors a pullback prior to big tech earnings allows for a sigh of relief because a run-up into earnings often becomes a "sell the news" event.

The three largest holdings in the SPY ETF consolidated Friday. Apple Inc AAPL, which makes up 5.52% of the SPY, closed slightly lower while Microsoft Corporation MSFT, at 5.28%, failed to get follow-through on a new all-time high and Amazon.com Inc. AMZN, at 3.8%, closed down over 1%.

While a number of bullish options traders purchased call contracts of the SPY, the Friday afternoon trades skewed overwhelmingly toward the bears. Together bearish traders bet over $9.12 million the SPY has room to fall further.

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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 the market price for the call or put option instead of placing a bid, which sweeps the order book of multiple exchanges to fill the order immediately.

These types of 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 Trades: Below is a look at the notable options alerts, courtesy of Benzinga Pro:

• At 12:36 p.m., a trader executed a put sweep near the ask of 4,521 SPY options with a strike price of $355 expiring on Aug. 20. The trade represented a $194,403 bearish bet for which the trader paid 43 cents per option contract.
• At 12:47 p.m., a trader executed a put sweep near the ask of 300 SPY options with a strike price of $434 expiring on Aug. 6. The trade represented a $164,100 bearish bet for which the trader paid $5.47 per option contract.
• At 12:47 p.m., a trader executed a put sweep near the ask of 1,569 SPY options with a strike price of $435 expiring on Aug. 20. The trade represented a $1.18 million bearish bet for which the trader paid $7.58 per option contract.
• At 12:57 p.m., a trader executed a put sweep near the ask of 275 SPY options with a strike price of $420 expiring on Sept. 30. The trade represented a $231,825 bearish bet for which the trader paid $8.43 per option contract.
• At 1:10 p.m., a trader executed a put sweep near the ask of 1,294 SPY options with a strike price of $415 expiring on Aug. 20. The trade represented a $392,082 bearish bet for which the trader paid $3.03 per option contract.
• At 1:34 p.m., a trader executed a put sweep near the ask of 2,000 SPY options with a strike price of $430 expiring on July 21. The trade represented a $256,000 bearish bet for which the trader paid $1.28 per option contract.
• At 1:34 p.m., a trader executed a put sweep near the ask of 2,000 SPY options with a strike price of $430 expiring on July 21. The trade represented a $258,000 bearish bet for which the trader paid $1.29 per option contract.
• At 1:35 p.m., a trader executed a put sweep near the ask of 576 SPY options with a strike price of $430 expiring on Aug. 20. The trade represented a $351,360 bearish bet for which the trader paid $6.10 per option contract.
• At 1:35 p.m., a trader executed a put sweep near the ask of 2042 SPY options with a strike price of $430 expiring on July 21. The trade represented a $267,502 bearish bet for which the trader paid $1.31 per option contract.
• At 1:35 p.m., a trader executed a put sweep near the ask of 3,000 SPY options with a strike price of $430 expiring on July 21. The trade represented a $402,000 bearish bet for which the trader paid $1.34 per option contract.
• At 1:42 p.m., a trader executed a put sweep near the ask of 11,102 SPY options with a strike price of $426 expiring on July 19. The trade represented a $222,040 bearish bet for which the trader paid 20 cents per option contract.
• At 2:39 p.m., a trader executed a put sweep near the ask of 2,477 SPY options with a strike price of $425 expiring on July 23. The trade represented a $297,240 bearish bet for which the trader paid $1.20 per option contract.
• At 2:40 p.m., a trader executed a put sweep near the ask of 1,286 SPY options with a strike price of $431 expiring on July 28. The trade represented a $456,530 bearish bet for which the trader paid $3.55 per option contract.
• At 2:42 p.m., a trader executed a put sweep near the ask of 1,698 SPY options with a strike price of $434 expiring on July 21. The trade represented a $387,144 bearish bet for which the trader paid $2.28 per option contract.
• At 2:45 p.m., a trader executed a put sweep near the ask of 3,320 SPY options with a strike price of $431 expiring on July 21. The trade represented a $657,360 bearish bet for which the trader paid $1.98 per option contract.
• At 2:46 p.m., a trader executed a put sweep near the ask of 500 SPY options with a strike price of $430 expiring on Aug. 20. The trade represented a $324,500 bearish bet for which the trader paid $6.49 per option contract.
• At 2:57 p.m., a trader executed a put sweep near the ask of 1,000 SPY options with a strike price of $420 expiring on Aug. 20. The trade represented a $420,000 bearish bet for which the trader paid $4.20 per option contract.
• At 3:02 p.m., a trader executed a put sweep near the ask of 2,604 SPY options with a strike price of $422 expiring on July 30. The trade represented a $562,464 bearish bet for which the trader paid $2.16 per option contract.
• At 3:06 p.m., a trader executed a put sweep above ask of 9,914 SPY options with a strike price of $420 expiring on July 30. The trade represented a $1.9 million bearish bet for which the trader paid $1.92 per option contract.
• At 3:12 p.m., a trader executed a put sweep near the ask of 240 SPY options with a strike price of $421 expiring on Sept. 17. The trade represented a $195,840 bearish bet for which the trader paid $8.16 per option contract.

SPY Price Action: The SPDR S&P 500 closed down 0.78% at $431.34 a share on Friday.