SPY Options Signal Bearish Contingency Amid Bullish Momentum: Key $680 Put OI and 7,250 Target

• Put/call ratio of 2.33 shows bearish bias, but SPY’s 52-week high of $695.31 hints at unresolved bullish momentum.

• Block trades selling $650 puts and buying $740 calls suggest institutional hedging and long-term optimism.

• Technicals point to a potential 7,250–7,490 target, but $680–$686 resistance could trigger a pullback.

Here’s the core insight: SPY is caught in a tug-of-war between short-term bearish options positioning and long-term technical bullishness. The market is pricing in a possible dip to $680–$686, but the ETF’s 50-day moving average and Elliott wave patterns suggest a breakout above $7,000 is still on the table. Traders need to watch the $695–$700 level like a hawk—it could be the line in the sand.The Options Imbalance: A Bearish Hedge in a Bullish World

SPY’s options market is screaming caution. The top OTM puts have a combined 1.1 million open interest, with the $680 strike (SPY20260116P680) leading at 125,421 contracts. That’s not just noise—it’s a bet that SPY could drop 1.3% in the next week. Meanwhile, the top OTM calls are clustered around $695–$705, with the $700 call (SPY20260116C700) at 45,142 contracts. The imbalance? A 2.33 put/call ratio that screams, "Buy the dip, but don’t get greedy."

Block trades add fuel to the fire. A 1,000-lot sale of $650 puts (SPY20260618P650) and a 1,000-lot buy of $740 calls (SPY20260618C740) suggest big players are hedging against a near-term dip while locking in long-term upside. The $680 put (SPY20260116P680) is the most dangerous strike—it’s just 2% below the current price and sits right under the 50-day moving average. If SPY breaks that, the 200-day line at $630.55 becomes a new target.

News vs. Options: A Clash of Narratives

The headlines are mixed. SPY’s $8 billion outflow to gold ETFs in early January shows investors are fleeing to safety, but the ETF’s 1.15% dividend yield and rebranding under State Street’s name are positives. The DOJ’s Fed investigation and Venezuela tensions are keeping bears in play, but the S&P 500’s 16.4% annualized gain in 2025 is a reminder of the ETF’s long-term strength.

Here’s the twist: The options market is pricing in a 1.3% drop, but the technicals (MACD above signal line, RSI at 72.5) suggest SPY could rally to 7,250–7,490. The rebranding won’t move the needle much, but the outflows to gold ETFs could amplify volatility if the Fed investigation escalates.

Actionable Trades: Play the Breakout or Hedge the Downturn

For options traders, the $680 put (SPY20260116P680) is a must-watch. If SPY dips below $690, this strike could see a surge in buying. For the bullish case, the $700 call (SPY20260116C700) is a high-conviction play if the ETF breaks above $695. Both expire this Friday—bold the strikes to track them.

Stock traders should consider entry near $690 if the 50-day moving average holds. A breakout above $695 could target $7,250, but a drop below $686 would test the 200-day line. Use the $680 put as a stop-loss reference.

Volatility on the Horizon

SPY is at a crossroads. The options market is bracing for a 1.3% drop, but technicals and macroeconomic optimism suggest a 7,250–7,490 target is still alive. The key is to stay nimble: Buy the dip if SPY holds $680, but don’t ignore the bearish OI at that level. The next 48 hours could decide whether this is a short-term correction or the start of a deeper pullback. Either way, the $695–$700 zone is the battleground to watch.