There was a bacchanalia of downside activity in exchange-traded funds yesterday as bears took charge of the market.
OptionMonster's tracking systemsshowed put volume of almost triple the average in the SPDR S&P 500 ETF. It was more than twice the normal level in the two other major funds: the iShares Russell 2000 Index and the PowerShares QQQ Trust, which tracks the Nasdaq 100.
The SPY fell 2.35 percent yesterday, while the IWM and QQQQ both lost more than 3 percent. The good news is that most of the activity resulted from investors unloading existing protective positions rather than implementing new downside strategies.
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Similar transactions were detected in the Financial Select Sector SPDR, where put volume surged to an unusually high 3-to-1 ratio versus calls.
The most outright negative trades occurred in the SPDR S&P Metals & Mining exchange-traded fund, where an investor rolled a downside position to a lower strike. XME puts outnumbered calls by a whopping 11 to 1.
The options action came amid in a surge in the VIX , which popped above 25 percent—its highest level since Feb. 11.
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Jon 'DRJ' Najarian is a professional investor, CNBC contributor, and cofounder of OptionMonster.com.
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