SPY Options Signal Deep Put Skew as $680 Put Block Trades Intensify – Here’s the 2026 Breakout Play

• Put/call open interest ratio hits 2.31, with $680 puts dominating the options chain

• Block trades show 16,065 puts bought at $690 and 16,065 puts sold at $680 ahead of Jan 23

• Deutsche Bank targets SPY at $8,000 by year-end, but short-term technicals hint at $673 support test

Here’s the thing: SPY’s options market is screaming caution. With put open interest dwarfing calls by over 2-to-1 and block trades showing heavy put accumulation, the crowd is hedging for a pullback. But buried in the data is a bullish twist – the 30-day RSI at 70.19 and Deutsche Bank’s 8,000 target suggest this could be a buying opportunity in disguise.

Put Skew Signals Caution, But Calls Hint at Optimism

Let’s start with the options chain. The $680 puts (SPY20260123P680) dominate with 119,000 open contracts – nearly double the next closest put. That’s not just bearish sentiment; it’s institutional positioning. Meanwhile, the $700 calls (SPY20260123C700) have 44,310 open contracts, showing some conviction in a rebound. The block trades add intrigue: 16,065 puts bought at $690 and 16,065 sold at $680 ahead of Jan 23 suggest a battle for control between bears and bulls. If SPY breaks below $685.56 (middle Bollinger Band), the $673.34 lower band becomes a critical support level.

News Flow: Outflows vs. Long-Term Bullishness

SPY’s recent $5.8B outflows clash with Deutsche Bank’s 8,000 target. On one hand, the ETF’s 0.8% drop and sector rotation outflows signal short-term jitters. On the other, underlying components like Alphabet and Exxon are rallying, and the S&P 500’s 52-week high of $696.09 shows resilience. The key tension? Investors are fleeing SPY despite its historical role as a market proxy. This disconnect creates a setup where short-term volatility could test $679.27 (200D support), but long-term fundamentals remain intact if earnings season holds up.

Actionable Trades: Hedging and Breakout Plays

For options traders, the most compelling plays are:

• Sell SPY20260123C700 calls if SPY stays below $700. With 44,310 open contracts, this strike is a magnet for volatility. Target $3.62 premium if SPY closes below $700 by Jan 23.
• Buy SPY20260123P680 puts for downside protection. At $694.84, SPY is just 1.4% from this strike. If the $673.34 lower band holds, these puts could gain 20-30%.

For stock traders, consider:

• Entry near $687.56 (30D support) with a stop-loss below $685.56. Target $696.09 (intraday high) if the S&P 500’s earnings momentum holds.
• Short-term fade at $696.09 if RSI overbought conditions trigger a pullback. Use the $692.09 intraday low as a dynamic stop.

Volatility on the Horizon: Balancing Risk and Reward

SPY’s options market is a tug-of-war between cautious puts and hopeful calls. The block trades at $690 and $680 suggest smart money is positioning for a $673-685 range battle. But Deutsche Bank’s 8,000 target isn’t just wishful thinking – AI and energy tailwinds could push SPY higher if the Fed eases. The real opportunity? Using the current put skew to hedge long-term positions while eyeing the $696.09 breakout level. In 2026, SPY’s story isn’t just about short-term volatility – it’s about who controls the narrative when the S&P 500’s next leg higher begins.