As stocks slide, the big money is getting in

Even as stocks are sliding hard, the biggest options traders have been making bullish wagers on stock indexes—which could indicate that the big money senses a buying opportunity in the market.

The S&P 500 fell to a nearly two-month low on Thursday, and at one point looked primed to have the first four-day losing streak of the year. But on Wednesday and Thursday, some of the day's biggest trades have been sales of put options on the S&P 500 and the Nasdaq 100, as well as sales of call options on the VIX.

Since the VIX tends to rise as stocks fall and traders become fearful, these institutional-sized trades on the CBOE Volatility Index indicate that major options players think the worst may be over.

"What we've seen in the last day or so is people starting to unload their insurance, take that protection off," said Brian Stutland of Equity Armor Investments. "To me, when we get the market down and yet people are taking insurance off, it tells me that the smart players out there are trying to buy into this market—remove the insurance, and play to the upside in stocks."

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Stutland says that with so much money behind them, these trades should carry some weight in investors' minds.

"When you talk about volatility, these are the smart traders out there in the world," he said.

Jim Iuorio of TJM Institutional Services says selling puts on stocks right now makes sense to him. He had been pursuing a strategy of buying bullish call options while shorting the underlying asset as a partial hedge. However, he has now started to sell puts against those long positions, which gives him a way to capitalize on his intention to get into the market at a given level within a given time period.

Stutland is also bullish, explaining that the chart of the S&P 500 also gives him a reason to buy in now. The index sliced through its 100-day moving average on Wednesday, and "that's typically been a great entry level into the market going all the way back to 2011."

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He recommends buying the S&P 500 futures at 1,932 with a target of 1,957, which is about where that 100-day moving average comes in now. However, he cautions that he'd become very worried if the S&P futures fell below 1,912, because of precisely the sorts of trades he referenced.

"If we break there, since people don't have insurance on right now, we could see a whole flush-out below that level," Stutland said.

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