SPY option profit opportunity while VIX is low

The Market Ear recently teased a swoon in S$PX/SPY, noting at the end of last week: "The absolute cost of a 2 month 5% put in SPX is trading at one of the lowest level in ~2 years."

Puts cost too much, but when VIX is low, so are put premiums (relatively).

If you think the market could see a 5% swoon from here in the short term, there are a couple of ways to play it.

One would be to buy puts outright. As of Friday's close, SPY 385 puts for 3/31 expiry were priced at $5.17 per contract. If SPY breaks soon, your theta loss would be minimal while implied volatility increases could provide quick early profits.

Traders whose favor a fixed risk/reward strategy could purchase 395-385 put debit spreads for 3/31 expiry at $2.27 per spread (as of Friday's close). Your maximum loss would be $227 per spread with a maximum gain of $772, roughly a 3:1 R/R ratio.

As with all option plays, traders will want to watch days-to-expiry and drawdowns, and consider taking profits on the way down.