SPY Option Strategy Shift: From Collars to Married Puts Amid Low Volatility

On December 23, 2025, a Seeking Alpha article [1] reported that traders are transitioning from collar option strategies to married puts for the SPDR S&P 500 ETF Trust (SPY). A collar involves holding a long stock position, buying a protective put, and selling a call option to offset put costs. A married put, by contrast, combines a long stock position with a protective put without selling a call, preserving upside potential but carrying higher upfront costs.

The shift is driven by

• The VIX dropped 25% from $18.25 to $13.69 over the 20 trading days prior (November 26–December 24, 2025), confirming the low volatility environment [0].
• SPY’s daily standard deviation (volatility) was just 0.52% over the same period, well below historical averages [0].
• With call premiums reduced due to low volatility, collars no longer effectively offset the cost of protective puts, making married puts more appealing despite their higher upfront expense [1].

1. Investor Sentiment Blend
   : The shift to married puts indicates a mix of caution and optimism. Investors are hedging downside risk (via puts) while preserving upside potential (by avoiding short calls), suggesting they expect near-term market stability but want to protect against unexpected downturns [1].
2. Volatility-Dependent Strategy Preference
   : Strategy appeal is highly sensitive to volatility levels. If the VIX rises materially—due to economic news, geopolitical events, or market shifts—collars may regain favor as higher call premiums offset put costs [0].
3. Option Market Dynamics
   : Increased demand for SPY put options (used in both strategies, but collars sell calls to offset costs) may marginally elevate put premiums in the near term [1].

• Volatility Spike Risk
  : A sharp rise in the VIX would significantly increase the cost of married puts, potentially eroding returns [0].
• Opportunity Cost
  : Collars offer downside protection at a lower upfront cost (via call premium offsets). If markets rise slowly, collars may outperform married puts [1].
• Liquidity Risk
  : Investors should monitor liquidity in SPY options to ensure efficient strategy execution, especially during market stress [0].

• Upside Preservation
  : Married puts allow investors to benefit from potential market growth without capping gains, unlike collars [1].
• Low-Cost Hedging Window
  : The current low volatility environment may still offer relatively attractive pricing for protective puts before a potential volatility spike [0].

• Event
  : Shift from collars to married puts for SPY due to low volatility and muted call premiums [1].
• Key Metrics
  : VIX at 13.69 (down 25%), SPY daily volatility 0.52%, SPY price $689.25 (near 52-week high of $689.70) [0].
• Immediate Impact
  : Neutral on SPY stock price, potential marginal increase in SPY put premiums [1].
• Sentiment Indication
  : Investors are hedging downside risk while maintaining upside exposure [1].

[0] Ginlix Analytical Database
[1] Seeking Alpha - “S&P 500: Its Not A Buy Or A Sell, Its A Married Put!”
URL: https://seekingalpha.com/article/4855427-sp500-its-not-buy-or-sell-its-married-put
Date: 2025-12-23