SPY Options Signal Deep Put Dominance at $555 as Bulls Counterattack Near $685: How to Play the Rebound

• SPY trades at $684.54, clinging to a 0.1% intraday gain amid a bullish engulfing candle and rising 30D MA support.
• Put/call open interest ratio hits 2.17, with 500K+ puts at $555 hinting at a shadow floor for the ETF.
• Institutional block trades show 6,000 calls bought at $657 and 1,220 puts at $680—a tug-of-war between bears and bulls.
• MACD histogram surges above 1.57 while RSI hovers near 50, suggesting momentum could tip either way.

Here’s the takeaway: SPY is dancing on a tightrope. The options market is pricing in a high-probability bounce near $685 but with deep puts at $555 acting as a safety net. If you’re trading this, you need to balance the short-term bullish setup with the lurking bearish overhang.

The Put/Call Imbalance: A Bearish Floor vs. Bullish Catalyst

Let’s start with the elephant in the room: 11.7 million puts outstanding versus just 5.4 million calls. That’s not normal. The top OTM puts for Friday’s expiration are all sub-$600 strikes, with the $555 put (OI: 503,657) standing out like a neon sign. Think of it this way—options buyers are essentially betting SPY won’t fall below $555 before year-end. If that level holds, it could spark a rebound.

But don’t ignore the calls. The $685 strike (OI: 26,493) and $700 strike (OI: 19,896) show decent demand for upside. Combine that with the bullish engulfing pattern and a 30D MA at $675.34, and you’ve got a setup where a break above $685.37 (today’s high) could trigger a rally toward $690.

Now, the block trades add intrigue. The 6,000 calls bought at $657 (SPY20250930C657) suggest big players are hedging against a rebound. Meanwhile, the 1,220 puts at $680 (SPY20250916P680) indicate some short-term bearish positioning. It’s a classic tug-of-war—don’t be surprised if SPY gaps higher or lower next week.

No Major News, But Sentiment Is Everything

The lack of recent headlines about the S&P 500 ETF means we’re dealing with pure technical and options-driven sentiment. That’s both a blessing and a curse. On one hand, there’s no conflicting fundamental noise. On the other, it means the market is pricing in its own narrative—mostly fear of a year-end selloff.

Investor perception here is key. If SPY holds above $683.21 (30D support), the fear of a breakdown fades. But if it dips below $682.17 (today’s low), those deep puts at $555 could get exercised, dragging the ETF lower. The ETF’s performance is now a self-fulfilling prophecy: traders are betting on their own expectations.

Trade Ideas: Calls for the Rebound, Puts for the Safety Net

For options traders, the most attractive setups are:

• Buy SPY20251205C685 (this Friday’s $685 call): If SPY breaks above $685.37, this strike could see explosive gains. The 30D support at $675.34 and bullish RSI suggest momentum is on the bulls’ side.
• Buy SPY20251212C700 (next Friday’s $700 call): A longer-term play if the ETF surges past $690. The MACD histogram’s strength implies upward momentum could persist.
• Sell SPY20251205P555 (this Friday’s $555 put): If you believe the ETF won’t collapse, selling these puts could generate premium income. But tread carefully—this is a high-risk trade if the market panics.

For stock traders, consider:

• Entry near $683.21 (30D support): If SPY holds here, target $690 as a short-term ceiling. Use a stop-loss below $682.17 to protect against a breakdown.
• Bearish put spread: SPY20251205P670/SPY20251205P660: If the ETF dips below $683.21 and tests $668.30 (200D support), this spread could profit from a deeper correction.

Volatility on the Horizon: Positioning for SPY’s Next Move

The next 72 hours will be critical. SPY needs to close above $685.37 to confirm the bullish engulfing pattern. Failure to do so could reignite the bearish puts at $555. Meanwhile, the block trades at $657 and $680 suggest institutional players are bracing for either outcome.

Your best bet? Stay nimble. If the ETF holds its support levels, the calls at $685 and $700 could be your allies. But don’t ignore the puts—volatility is a two-way street. The key is to align your trades with the ETF’s likely path, not just its current price.