SPY Options Signal Deep Bearish Sentiment: How to Position for a Potential 680-Level Breakdown on Feb 13

• SPY surges 1.7% to $689.25 but RSI at 37 suggests oversold rebound
• Put/call open interest ratio hits 2.21 as 201k puts at $585 show extreme downside prep
• Massive block trades buying 20,000 puts at $656 and $651 ahead of February expiration

Here's what the options market is screaming: investors are bracing for a major selloff. With SPY trading near its 30-day moving average but with bearish momentum metrics, the combination of technicals and options positioning points to a high probability of breaking below key support levels in the coming days. Let's break down why this 680 threshold could be SPY's next battleground.

Where the Smart Money Is Hedging Catastrophe

The options chain tells a story of panic. For Friday expiration, puts at $585 ($500 below current price) have 201k open interest while the nearest OTM calls at $700 have just 22k. This 9:1 put dominance isn't just bearish—it's apocalyptic prep. The block trades add fuel: 19,998 puts bought at $656 (SPY20260220P656) and $651 show institutional players locking in downside protection 30-35 points below current levels.

But here's the twist: while the puts scream "crash coming," the calls aren't entirely ignored. The $700 strike has 22k open interest, suggesting some contrarians see a 1.7% rally as just the beginning. This creates a fascinating tension—will SPY's 1.7% intraday swing be a buying opportunity for bulls or a false flag before the bears take control?

The Empty Newsroom Paradox

With no recent company-specific news, this options-driven narrative becomes even more critical. Without fundamental catalysts, technical breakdowns gain outsized influence. The RSI at 37 suggests the recent 1.7% rally might be a last gasp of bullish momentum. Think about it: when there's nothing to cheer about, every technical failure becomes a self-fulfilling prophecy.

Actionable Trade Setups for Feb 6-13

For options traders, the most compelling plays are:

• Bear Call Spread: Sell SPY20260213C690 (strike at Bollinger Band) and buy SPY20260213C700. Maximum profit if SPY stays below $690
• Put Buyers: Consider SPY20260213P680 (61k OI) or SPY20260213P675 (61k OI) for next Friday's expiration

For stock traders:

• Short Entry: Consider selling SPY near $690 if it breaks below the 30D MA at 689.47. Stop-loss above Bollinger Middle Band at 690.32
• Bullish Contingency: If SPY closes above $695.13 (30D support), consider buying back long positions with tight 1-2% stop-losses

Volatility on the Horizon

The coming days will test whether this 1.7% rebound is sustainable or just a bear market rally. With 2.2 million puts outstanding versus 1 million calls, the market is pricing in significant downside risk. But don't discount the possibility of a short squeeze if SPY manages to hold above 689.47. The 200D MA at 644.32 remains a distant floor, but the immediate battleground is between 679.80 (lower Bollinger) and 690.32 (middle Bollinger).

This is a high-stakes chess match where every tick below 690 increases the pressure on longs. The block traders buying 20k puts at $656 aren't worried about a 5% correction—they're preparing for something much worse. But remember, in a ranging market, sharp pullbacks often create buying opportunities. The key will be how volume behaves at these critical levels. If SPY breaks 680 with expanding volume, the bear case becomes a full-blown stampede. If it bounces with strong buying interest, we might see a classic volatility squeeze setup.