I now have more color on that gigantic SPY put trade (720K contracts) executed last Thursday on ISE:
It was a 120K by 240K put backspread rolled from August to December, executed on behalf a major US-based hedge fund;
120k of Aug 92 puts were traded up to Dec 95 puts
240K of Aug 80 puts were traded up to Dec 82 puts;
the transaction was virtually fresh cash-neutral for the fund.
------------- What is a "put backspread" ??
From OXPS education webpages:
Put back spreads are great strategies when you are expecting big downward moves in already volatile stocks. The trade itself involves selling a put at a higher strike and buying a greater number of puts at a lower strike price.
Ideally, this trade will be initiated for a minimal debit or possibly a small credit. This way, if the stock gains ground, you won't suffer much either way. On the other hand, if the stock drops as you hope, the profit potential will be significant because you have more long than short puts. To maximize the potential for this position, many traders use in-the-money options because they have a higher likelihood of finishing in-the-money.
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