SPY Options Signal Major Bullish Setup: Here's How to Position for the 685–700 Breakout

• SPY trades at $684.53, up 0.13% with volume surging past 22 million shares
• Put/call open interest ratio hits 2.02—yet call buying at $700 strike dominates
• Block trades show $4.5M poured into SPY20250930C657 call ahead of September expiry

Here’s the bottom line: SPY is dancing on a tightrope between cautious bearish sentiment and aggressive bullish positioning. While puts dominate open interest, call buying at key strikes suggests smart money is prepping for a breakout above $685. Let’s break down why this could be your best setup this week.

The Options Imbalance Telling Us to Watch 685–700

The options market is sending mixed but actionable signals. On one hand, puts are overwhelmingly dominant—$555 and $505 strikes alone hold 500k+ open interest. But here’s the twist: calls at $685 and $700 (expiring Friday and next Friday) are seeing explosive accumulation. The SPY20251212C685 has 13,388 open contracts, while the SPY20251219C700 jumps to 99,258.

This isn’t just retail frenzy. Block trades show institutional players moving $4.5 million into the SPY20250930C657 call in late September. Combine that with the 6000+ contracts bought at SPY20251121C680, and it’s clear: big players are hedging for a late-2025 rally. The danger? If SPY stumbles below $670 (where $660–$670 puts have 100k+ OI), the bears could force a retest of the 200D MA at $618.

No Major News—But Options Are Pricing in a Macro Play

There’s no recent headline risk for SPY—yet the options market is pricing in a story. With RSI at 65 and MACD above signal line, technicals suggest a continuation above $683.20 (30D support). The real question: Is this a quiet buildup for a Q4 earnings surge or a hedge against Fed rate uncertainty? Either way, the $695 Bollinger Band ceiling looms as a critical level. If SPY cracks that, the 685–700 range becomes a magnet for momentum traders.

3 Specific Trades to Lock in the Setup

1. Options Play: Buy SPY20251212C685 (expiring Friday) at $685.50. Why? The strike sits just above today’s intraday high of $685.38. If SPY closes above $685 Friday, this call could see 10%+ gains. For a longer play, SPY20251219C700 offers leverage if the 200D MA retest fails.

1. Stock Entry: Consider buying SPY near $683.20 if price tests the 30D support. Set a tight stop below $682.83 (today’s low). Target zone: $688–$690 aligns with Bollinger Band resistance.

1. Bearish Hedge: Sell SPY20251219P650 (if available) to collect premium while capping downside risk. The $650 strike sits well below current price but within 200D MA territory.

Volatility on the Horizon

The next 72 hours will be critical. If SPY holds above $683.20 and volume stays above 20 million, the 685–700 range becomes a fortress. But watch for a breakdown below $682.83—it could trigger a cascade of stop-loss orders at the 200D MA. For options traders, Friday’s expiry (Dec 12) offers a binary test: close above $685, and the 700 calls become a monster play.

Bottom line: This isn’t a high-risk gamble—it’s a calculated bet on institutional positioning and technical alignment. The key is to stay nimble. If SPY surprises to the downside, the $660–$670 puts could force a reevaluation. But for now, the data says one thing: the bulls are building a bridge to $700, and the options market is paying attention.