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."
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.