Stock Groups

A Trader Spent $50 Million on Options Betting on S&P 500 Rally By Bloomberg

[ad_1]

© Reuters. A Trader Spent $50 Million on Options Betting on S&P 500 Rally

(Bloomberg) — One trader just took on a massive bet that U.S. stocks will rally into the end of 2021.

The flurry of trades with the SPDR S&P 500 ETF Trust (ASX:) — which took place between 10:34 a.m. and 10:41 a.m. New York time — involved call spreads maturing in each of the next three months. It cost approximately $50 million. According to Chris Murphy (co-head of Susquehanna’s derivatives strategy), if all contracts were in money before their expiration dates they would have a value of $136 million. This is a profit of approximately 70%. 

“These trades all share very similar footprint,” said Murphy. “It could be someone who is underweight equities and says, ‘if this thing explodes to the upside by the end of the year, then I’m going to be in trouble. So why don’t I put on a couple of these call spreads just to cover myself?’ That’s one situation. Or it could be someone who’s bullish getting more bullish.”

The transactions occurred right before the Federal Reserve’s policy decision. The climbed more than 1% Wednesday, snapping a four-day decline, as concerns about China Evergrande Group’s debt woes eased. The index fell 2.6% in September and is headed for its worst month in nearly a year. 

It “seems like someone putting money to work to play for a rally into year-end following the recent selloff,” said Danny Kirsch, head of options at Cornerstone Macro LLC. “Interesting they’re also doing it in front of the Fed meeting, perhaps think the outcome will be market positive.” 

Here are the details of the trades using bullish options on SPY: 

  • 25,000 Dec. 448/470 call spreads for $7.91
  • 32,000 Nov. 448/460 call spreads for $4.35
  • 43,000 Oct. 442/452 call spreads for $3.89

©2021 Bloomberg L.P.

 

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. CFDs are stocks, indexes and futures. Prices are provided not by the exchanges. However, market makers provide accurate prices. These prices can be inaccurate and could differ from actual market prices. This means that prices should not be used for trading. Fusion Media does not accept any liability for trade losses that you may incur due to the use of these data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. You should be aware of all the potential risks and expenses associated with trading in the financial market. It is among the most dangerous investment types.



[ad_2]