SPY Options Signal Deep Put Skew and Whale Moves: Trade the 685 Call or 670 Put as 2026 Bullishness Battles Near-Term Volatility

• SPY’s put/call open interest ratio is 2.07, with 505K puts at $505 (next Friday) showing extreme downside positioning
• Block traders bought 6,000 SPY20250930C657 calls for $757k, hinting at long-term bullish bets
• RSI at 60.8 and Bollinger Bands suggest SPY is testing key support near $674.26

Here’s the takeaway: SPY is caught between a 2026 bull case (tech-driven 20% upside) and near-term technical fragility. The options market is pricing in a high probability of a pullback—but not a crash—while block trades suggest smart money is hedging for a rebound. Let’s break it down.

Put Skew Dominance and Whale Moves: Why $670–$685 Is the Battleground

The options chain tells a story of fear and preparation. For next Friday’s expirations, puts at $505 ($215 below current price) have 216K open interest—a staggering 3.4x the nearest call strike. This isn’t just bearish sentiment; it’s institutional positioning for a catastrophic drop. Meanwhile, the $685 call (just 0.5% above current price) has 27K open interest, suggesting retail and smaller players are betting on a bounce off key support.

Block trades add intrigue. The SPY20250930C657 call (expiring Sept 30) saw 6,000 contracts bought for $757k—a $4.5M bet that SPY will rebound to $657 by year-end. This isn’t a panic play; it’s a calculated bet that macroeconomic softness will stabilize before year-end. Conversely, the SPY20260116P645 put (sell put) at $645 suggests some players are shorting SPY for a January 2026 dip.

News Flow: Tech Optimism vs. Technical Weakness

The headlines are a mixed bag. Deutsche Bank’s 8,000 target for 2026 and Carvana’s S&P 500 inclusion are bullish, but technical indicators are flashing caution. SPY broke its November trend channel, and the 50-day MA (676.35) is still above the 200-day (617.86)—a sign the long-term trend is intact. However, the RSI at 60.8 and MACD histogram (1.68) suggest momentum is slowing. If SPY closes below its 30D support at $683.20, watch for a test of the 200D support at $668.30.

Actionable Trades: Calls for Bounce Plays, Puts for Downside Protection

For options traders:

• Bullish Play: Buy SPY20251219C685 calls (next Friday) at $685. If SPY holds above $681.57 (intraday low), these could profit from a rebound toward 690–700.
• Bearish Hedge: Buy SPY20251219P670 puts (next Friday) at $670. These offer downside protection if SPY breaks below 683.20 and heads toward 674.26 (middle Bollinger Band).

For stock traders:

• Entry Near $683.20–683.90 (30D support/resistance range). Use a tight stop-loss below $681.57.
• Target Zones: $690 (psychological level) and $694.29 (upper Bollinger Band).

Volatility on the Horizon: Balancing Bullish Fundamentals and Bearish Positioning

The key takeaway? SPY is in a holding pattern. The long-term bull case (tech-driven 2026) is intact, but near-term volatility—driven by the put skew and technical breakdowns—could create sharp swings. If you’re long-term bullish, use the next few weeks to add SPY calls or buy the dip at 668–674. If you’re cautious, the 670–680 put range offers cheap insurance. Either way, the market is pricing in a test of conviction—and the next move could be explosive.