SPY Options Signal Bearish Near-Term but Bullish Long-Term: Trade the $680 Call Breakout or Hedge with Puts at $650

• SPY trades at $678.19, up 1.01% with volume surging to 14.2M shares—its highest in weeks.
• Options data shows a 1.74 put/call open interest ratio, with massive put OI at $505 and call OI at $700.
• Block trades reveal a $4.5M call buy at $657 and a $2.4M put sale at $645—hinting at strategic positioning.

Here’s the deal: SPY’s price action and options flow tell a story of tension. The ETF is perched near its 30-day support/resistance zone ($683–$684) while battling a short-term bearish trend. But the long-term MACD and 200-day MA ($621) scream bullish. Let’s break it down.

The Options Imbalance: Bears Dominate, But Bulls Are Ready to Strike

The put/call ratio of 1.74 (based on open interest) is a red flag for near-term bearishness. Put open interest is concentrated at extreme strikes like $505 (OI: 216K) and $650 (OI: 90K), while call OI peaks at $700 (OI: 95K). This suggests traders are hedging against a sharp drop or betting on a rally to $700+ by expiration.

But don’t ignore the block trades. A $4.5M buy of the SPY20250930C657 call (expiring Sept 30) and a $2.4M sale of the SPY20260116P645 put (expiring Jan 16) signal institutional players are locking in long-term bullish exposure. These moves hint at confidence in SPY’s ability to rebound above $685 by early 2026.

News Flow: Inflows and Earnings Could Tip the Scales

SPY’s recent $2.1B in inflows and Q4 outperformance vs. rivals (0.8% vs. 0.5% for IVV) reinforce its role as a core holding. But the SEC lawsuit and rate hike fears add volatility. The December 24 earnings report will clarify whether inflows continue or if management cuts dividends. If the report shows strong AUM growth, SPY could test the $697 upper Bollinger Band. If not, the $657 lower band becomes a critical support level.

Trade Ideas: Call Breakouts or Put Hedges

For options traders, the SPY20251219C680 call (expiring this Friday) is a high-conviction play. If SPY breaks above $683 (its 30-day support), this $680 strike could see a 5–7% move by Friday’s close. For stock traders, consider entering near $677.65 (the middle Bollinger Band) with a target at $684. Stop-loss below $675.69 (intraday low) would protect against a breakdown.

If you’re bearish, the SPY20251226P650 put (expiring next Friday) offers downside protection. With SPY’s RSI at 39 (oversold territory), a pullback to $657 could trigger a rebound—but the put gives you a safety net if the ETF stumbles.

Volatility on the Horizon

SPY is at a crossroads. The short-term technicals and options flow warn of a possible dip to $657, but the long-term MACD and 200-day MA suggest a rebound is coming. With earnings on the 24th and the Fed’s rate decision looming, volatility is inevitable. Position yourself with the $680 call for a breakout or the $650 put for a hedge—and watch the ETF’s next move closely.