Stocks made a record high. Two big bearish trades point to skepticism

The Nasdaq-100 is up 15% since its July low and is now 2% above its previous record from June. The S&P 500, after a two-month-long battle with surging interest rates, is back trading at an all-time high.

You'd think that resilience would be met with some fanfare. Instead, the two biggest options trades on the tape Tuesday reeked of skepticism.

In the State Street SPDR S&P 500 ETF Trust (SPY), about an hour after the opening bell on Tuesday, someone traded a 100,000-lot put spread that cost a net $44 million and likely included buying $61 million of 655-strike puts expiring in March and selling $17 million of 500-strike puts in the same expiry.

It's a bearish bet that is most profitable if the SPY falls to $500 — a 35% decline from its current levels.

"If you're trying to hedge, these March options are the cheapest they've been in 90 days," said Brent Kochuba of options analytics firm SpotGamma. "The vol is fairly low."

Cboe's VIX Index did slip below 15 at one point Tuesday, meaning options generally got cheaper, but the put spread was the biggest trade in SPY on a day where options volume was more than 20% higher than the 30-day average.

The bulky trade, which starts making money if the S&P 500 drops more than 18%, was about four times bigger than the next-biggest trade, a net $11 million call spread, SpotGamma data show.

At the same time, an even bigger trade went off in options on Meta despite the social media giant rallying 20% the past month as downloads of the tech giant's personal assistant Muse soar.

In the January 2029 expiry — the longest-duration contract on offer in Meta options — someone likely bought back $89 million worth of 560-strike calls they had sold, and at the same time opened a new position selling $69 million of 700-strike calls at the same date.

Selling calls against a long position is standard procedure for many investors, but using strikes that are in the money with more than two years to expiration looks like something different.

"The Meta trade might be some vol guy doing some kind of arbitrage," said Kochuba, admitting the trade was a bit of a head-scratcher.

It's worth pointing out the big trade in SPY largely ran contrary to the overall tone in options trading across the fund, according to Barchart's sentiment indicator, which gauges the net direction of premium in options trades.

"That could be due to bullish retail traders," John Rowland, Barchart's senior market strategist, said via email.

Not so much for Meta, where the site's data shows net sentiment was negative.