Time for Some 'Black Swan' Puts as Short Interest Falls to Lowest Level of the Year? (SPY)

I am a sick puppy. I see a story like this and I think:
a) everyone has rushed to the same side of the Titanic.
and
b) if we do get a drop it could be dramatic as there will be no short covering to ease the fall.
From Bloomberg:

Short Selling Against S&P 500 Drops to Lowest Level in 12 Months

Wagers against the Standard & Poor’s 500 Index fell to a one-year low as short sellers slashed bets that phone and consumer discretionary stocks, including Qwest Communications Inc. and Abercrombie & Fitch Co., will retreat.

Short interest on the S&P 500 dropped to 7.29 billion shares, or 4.15 percent of shares available for trading, as of Dec. 15, down 2.9 percent from two weeks earlier, according to data compiled by U.S. exchanges and Bloomberg. For phone companies, it slid 12 percent to 440.9 million, and fell 8.7 percent to 1.2 billion shares for consumer discretionary stocks.

"There’s been a lot of optimism in the market and it shows in many ways," said Richard Sichel, who oversees $1.5 billion as chief investment officer at Philadelphia Trust Co. "None of the main indicators make you want to move out of stocks other than for individual reasons."...MORE

I'll come back to this in a few days, for now I'd probably think something like a Jan. 120 put on the SPY at half a buck but that is just a facile something to say. A bit more thought and I'm sure a sub-index or two would look more attractive. And I'd  be tempted to buy a bit more time, maybe the Feb. although they cost triple the Jan.

The S&P 500 closed at 1258.51 so they are a bit out of the money. A 10% drop would get the index to 1132.66 which puts the 120's at $6.74 intrinsic.