SPY Options Signal Deep Put Skew: Here's How to Hedge or Profit from the $680 Put Play

• SPY trades at $692.82, down 0.34% with volume surging to 38.7M shares
• Put/call open interest ratio hits 2.31 as $680 puts dominate with 119,000 contracts
• Block trades show 16,065 puts bought at $690 for Jan 23 expiry

Here's what the data tells us: SPY is sitting at a crossroads. The options market is screaming bearish with a 2.31 put/call imbalance, while technical indicators show mixed signals. But the block trades? They're painting a clearer picture than the charts. Let's break it down.

The Put Overload at $680 and What It Means for Your Portfolio

If you've been watching SPY's options chain this week, you've noticed the elephant in the room: 119,000 puts at the $680 strike. That's not just bearish—it's deeply bearish. Compare that to the top call strikes ($700-$840) with combined OI of 140,000, and you see a 1.6x imbalance in puts.

But here's the twist: the block trades tell a story. On Jan 23, someone bought 16,065 puts at $690 (SPY20260123P690) for $323. That's not retail noise—it's institutional positioning. Meanwhile, the $680 put (SPY20260123P680) has 30,171 contracts in OI, suggesting a potential support level.

News vs. Options: Why the Disconnect Matters

All the recent headlines about SPY show a consistent -0.29% dip, but the options market is pricing in much more pain. The Fed-friendly CPI report and DOJ investigations might explain the short-term jitters, but the $550 put (SPY20260123P550) with 170,431 contracts shows investors are bracing for a much deeper drop.

This creates a paradox: while the news suggests market caution, the options data implies panic. That's where the opportunity lies. If you're long SPY, those $680-690 puts could be your insurance. If you're bearish, the $550 puts are a high-risk/high-reward play.

Actionable Trades for Today: Protect or Profit

For options traders:

• Buy SPY20260123P680 if SPY breaks below $685.55 (middle Bollinger Band). Target $650 with a stop above $692.
• Sell SPY20260123C697 if SPY consolidates between $692-$696. Collect premium as the $700 call (SPY20260123C700) has 44,310 contracts in OI.

For stock traders:

• Buy SPY at $685.55 if it holds above the 200D MA ($631). Target $695 with a stop at $679.27 (200D support).
• Short SPY at $696 if it fails to break above the 30D MA ($685.12). Target $680 with a stop at $698.

Volatility on the Horizon: What to Watch Next

The next 72 hours will be critical. If SPY holds above $685, the $697 call could become a magnet. But if it breaks below $680, the $550 put might see a surge in buying. Either way, the block trades at $690 suggest a short-term floor.

Your move depends on your risk tolerance. The options market is pricing in a 10% drop from current levels, but the technicals still show a bullish bias. This is where the art of trading meets the science of data—position yourself accordingly.