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The trade may have been tied to a delta hedge of nearly $100million worth of SPY or SP500 futures - and similar flow hit the tape in SPDR S&P 500 ETF (SPY) options on the AMEX at the same time (a buyer of 16K Oct 150-155 put spreads for 9.5cents), suggesting the initiator may have been putting on a complicated trade than the simple vertical spread and OCC clearing data confirms a firm (rather than customer) account was the source of the trade, suggesting there is likely more to the story than a simple vertical put spread. Midday quotes on Thursday show this spread quoted near $1.25, for a gain near $650K or 25%, but the bigger story here is how the trade marks the first 'mega' institutional block to be executed in the product. While SPX and SPY liquidity has been very strong for many years, yesterday's activity appears to position SPXPM as a valid option or the institutional flow, which is likely to attract further liquidity and accelerate the cycle that could bring SPXPM into the top tier with SPX and CBOE Volatility Index (VIX) as hedging vehicles for the largest market participants.

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At the time of publication, Henry Schwartz held positions in SPY.


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