SPY Chart

Mardi Matin and a SPY Trade Curiosity

The CAC40 is striving for 3000 this morning, surprisingly (or not) after Moody’s downgrade of the Italian  credit rating (A/A-1) the only direction has been up. It gapped down overnight, but on the European opening this morning the chart’s have been green. Futures are up almost 1% (GC_F) and stimulus hope is propping up the buyers. This continues to beg the question if anyone cares beyond the 30 minute headline reaction. The EURUSD continues to hold it’s own around 1.37.

I’m slightly curious though about a SPY butterfly which I saw pass yesterday. The trade was worth about $2,000,000.00 and set-up in the following manner.  It’s very bearish.

  • Buy 18500 Oct 113 Puts
  • Sell 37000 Oct 100 Puts
  • Buy 18500 Oct 87 Puts

It’s max profit bets on a 17% retracement by the October expiration! This trade looks for a break down under the 112 resistance over the next 3 weeks. I don’t really understand this trade, if it was a hedge it’s a big one. The following is a 3 yr. chart, I had to go out 3 years to see that the last time SPY hit 100 was in September 2009. Traders continue to be nervous (from a chart perspective) because there is an inverse relationship between volume and price. A rising trend on decreasing volume is not reassuring.

I posted a similar large trade a few months ago for the September quarterly experation which has worked out relatively well (here).

Good Trading.