Fund Initiates Large $SPY Ratio Put Spread Expiring In December (1x2)

On July 23, a total of 720,000 $SPY AUG 80-92 and DEC 82-95 PUT contracts traded on ISE which, according to sources below, appeared to be a 1x2 ratio put back-spread rolled from August to December as a way to hedge long exposure, cash neutral. This was one of the "largest trades ever conducted on the options market" (WSJ).

More color on that gigantic SPY put trade on Thursday (HamzeiAnalytics)

"It was a 120K by 240K put backspread rolled from August to December, executed on behalf a major US-based hedge fund; 120k of Aug 92 puts were traded up to Dec 95 puts and 240K of Aug 80 puts were traded up to Dec 82 puts; the transaction was virtually fresh cash-neutral for the fund."

Quoted from Reuters: S&P 500 ETF draws big bearish play as losses eyed:

"This trade is bearish and has a large area under which it would remain profitable to the downside," said Joe Kinahan, chief derivatives strategist at online brokerage thinkorswim Group. "This institutional investor is definitely looking for a pullback in the S&P 500 between now and December expiration."

Rather than an outright bearish bet, this appears to be a hedge on a long stock position in the Spiders, Schwartz said." (Reuters, July 23)

Here is when the AUG Puts were originated. Hopefully it was just a hedge against a large SPY position ($SPY rallied 11.3% since June 15).

"At least one option trader appears to be on the defensive in an exchange-traded fund that tracks the performance of the Standard & Poor's 500 index .SPX on fears the benchmark could suffer extended losses this summer."

"The Aug $92 and $80 puts have jumped to the top of the most actives list in morning trade as an investor apparently bought the $80-$92 (2X1) put ratio spread 120,000 times for about $1.75 premium on the International Securities Exchange, said WhatsTrading.com option strategist Frederic Ruffy. Both legs look like opening trades, he added." (Reuters, June 15)

Additional Information on the trade:
Other Plunge Protection Team: 122,017 December SPY $95 Puts (Zero Hedge)
S&P 500 ETF draws big bearish play as losses eyed (Reuters)
Huge Deal Captivates Traders (WSJ)
Massive Trade Printed on the ISE in options on the SP500 ETF (WhatsTrading)
Don't Get Lulled by the Calm (Barron's)
Beware of the Options Boogie Man (Barron's)