Big Options Trade Hedges S&P 500 Plunge of Up to 20% by April
- Put butterfly spread guards against drop in SPY to $350-$370
- The $2 million position involves 40,000 options contracts
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As the S&P 500 spent Monday struggling to rebound from last week’s loss, one options trader took on a big position that profits should the pain get much worse.
Through a series of trades, someone established a wager that the largest exchange-traded fund tracking the S&P 500 Index will fall below $370 by April 22, or down 16% from Friday’s close. It could fall further, the wager held, but not lower than $350, or almost 21% below Friday’s close. The trader spent about $2 million for 40,000 contracts in a strategy known as a put butterfly spread.