SPY Options Signal Deep Put Dominance at $555–$670: A Bullish Reversal Setup Near $683 Support?

• SPY trades at $684.19, clinging to a 0.08% intraday gain amid a short-term bearish engulfing pattern and long-term bullish momentum.
• Options market shows put open interest 2x call open interest, with extreme bearish focus at $555–$670 strikes.
• Block trades reveal 6,000 SPY20250930C657 calls bought and 1,150 SPY20250917P680 puts traded, hinting at strategic positioning.

The SPY options market is screaming a paradox: deep bearish sentiment at extreme put levels, yet technicals and recent inflows suggest a potential bullish reversal. With SPY hovering near its 30-day support at $683.20, traders need to parse this tension carefully. Here’s why the next 48 hours could define SPY’s near-term direction.

Put Overload at $555–$670: A Contrarian Signal?

The options chain is a study in extremes. For this Friday’s expiration, 503,741 puts at $555 and 33,781 at $670 dominate open interest—struck far below current price. This suggests institutional players are hedging against a catastrophic drop, but retail traders should note: extreme put buying often precedes short-covering rallies.

Meanwhile, next Friday’s data shows 99,258 calls at $700 and 216,203 puts at $505. The $700 call wall could act as a magnet if SPY breaks above its 20-day EMA (684.94). But the 2.01 put/call ratio warns of lingering bearish bias—until proven otherwise.

Block Trades: Bulls and Bears in the Room

The SPY20250930C657 block trade ($4.5M for 6,000 calls) is a red flag. Buying deep OTM calls at $657 (30% below current price) implies a bet on a sharp rebound. Contrast this with the SPY20250917P680 put trade (1,150 contracts at $680 strike), which suggests short-term hedging ahead of Trump’s policy announcements.

News-Driven Narrative: Liquidity Over Cost

SPY’s $18.1B inflow last week—despite cheaper alternatives like VOO—proves its role as a liquidity engine, not just a benchmark. Recent headlines about Trump’s AI regulations and Nvidia’s export approval highlight SPY’s sensitivity to macro shifts. The $44.2B ETF inflow surge shows investors prioritize speed over cost efficiency, which could fuel short-term volatility.

Trading the Contradiction: 3 Setups to Consider

1. SPY20251219C685 Call Buy (OI: 52,537): If SPY holds above $683.20 support, this $685 call (expiring Dec 19) offers leverage on a breakout. Target: $690–$700. Stop: Below $682.83 intraday low.

1. SPY20251212P670 Put Sell (OI: 33,781): With puts at $555–$670 overbought, shorting the $670 put this Friday could capitalize on a last-minute rally. Risk: SPY drops below $672.12 (200D resistance).

1. SPY Stock Buy at $683.20–683.90: The 30-day support zone aligns with the 200D MA (618.28) and recent block trade activity. Target: $695 (Bollinger Upper Band). Stop: Below $674.89 (middle band).

Volatility on the Horizon: Balancing Fear and Opportunity

SPY sits at a crossroads. The options market’s bearish overload creates a contrarian buying opportunity, especially with RSI at 65 and MACD (3.47) suggesting momentum remains intact. But don’t ignore the $555–$670 put wall—it could drag SPY lower if Trump’s policies trigger a selloff. For now, the key is to trade the support/resistance dance while watching for a breakout above $684.94.

In the end, SPY’s story isn’t just about numbers—it’s about liquidity, sentiment, and the eternal tug-of-war between bulls and bears. And right now, the scales are tipping… just not all the way yet.