By Alexander Osipovich and Krystal Hur

Market watchers have been scrutinizing some extremely well-timed options trades just ahead of President Trump's rally-sparking tariff announcement on Wednesday.

Shortly after 1 pm ET on Wednesday, volume spiked in bullish call options on State Street's popular SPDR S&P 500 ETF Trust, the index-tracking fund better known by its ticker SPY. The surge in activity took place in options that would pay off if SPY's price rose above $509 that day. At 1:06 pm, for instance, an unknown buyer spent about $21,000 to purchase 101 of the contracts, according to derivatives-data firm SpotGamma.

At 1:10 p.m., SPY was trading at about $501-so it would have taken a jump of more than 1.5% for those options contracts to deliver a payday. The trades were in so-called zero-day-to-expiry options, meaning they would have expired worthless within a few hours if markets had dropped.

Instead, at 1:18 p.m. ET, Trump announced in a Truth Social post that he was pausing many of his steepest tariffs for 90 days. The post set off a monster rally: the S&P 500 closed 9.5% higher on Wednesday, one of its biggest one-day jumps in history.

The price of the SPY options surged more than 10-fold. For instance, one changed hands for around $214 at 1:10 p.m. By the end of the trading session, its price had skyrocketed to roughly $3,458, according to Cboe Global Markets data.

Speculation erupted online that the buyers were people with inside knowledge about Trump's tariff move. "Insane, someone knew," tweeted the X account for data provider Unusual Whales, which was first to draw broad attention to them.

But there is also a more mundane explanation: Traders may have been reacting to the successful auction for 10-year Treasury notes that had just taken place at 1 p.m. ET, which eased worries about a sell-off in the U.S. government bond market.

SpotGamma founder Brent Kochuba said the trades looked like they had been carried out using "sweep orders." In such orders-which are made via an algorithm rather than manually placed by a trader-firms break up a large purchase into multiple smaller orders that "sweep" different exchanges seeking the best price. The orders could have been placed by traders who were short stocks and wanted to hedge against a potential rally, Kochuba suggested.

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(END) Dow Jones Newswires

April 10, 2025 14:57 ET (18:57 GMT)

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