Mike Khouw Sees Unusual Options Activity In SPDR S&P 500 ETF Trust

On CNBC's "Options Action", Mike Khouw spoke about an unusually high options volume in SPDR S&P 500 ETF Trust SPY. He noticed that the put options volume in the name was well above the daily average. Around 3.35 million puts were traded in SPDR S&P 500 ETF Trust on Wednesday while the average put options volume is around 2 million contracts.

Khouw noticed a big purchase during the trading session. Somebody bought 41,800 contracts of the February 240 puts for $5. The trade breaks even at $235 or 6.47 percent below the current market price. Khouw explained that the premium of $20.9 million seems a lot, but it was used to protect the notional value of $1.05 billion. The buyer decided to pay around 2 percent of the notional value to hedge the position from further declines, added Khouw.