Learn the trade here. Make it on tradeMONSTER

Options Trading News

February 7, 2013  Thu 9:48 AM CT

IWM: SEE CHART GET CHAIN FIND STRATEGIES
The iShares Russell 2000 Fund is pulling back from yesterday's record close, and a large three-way spread is looking for further losses.

A trader sold 20,000 March Weekly 82 puts for the bid price of $0.42 while buying 10,000 each of the 87 and 77 puts for $1.18 and $0.17 respectively, according to optionMONSTER's Depth Charge system. These contracts expire on March 28, a week after the regular monthly expiration.

The trader paid $0.51 to open the position, which is the maximum potential loss if the IWM is above $87 or below $77 at expiration. The maximum gain would come with shares right around $82 at that time.

The strategy, known as a butterfly spread, is a low-cost/low-risk trade. But in this case, it needs both direction and timing to work. (See our Education section)

The IWM is down 0.7 percent at $89.80 this morning after posting an all-time high closing price yesterday. There is support around that $82 level, with the last close below that in November.
Share this article with your friends


Related Stories

IWM

Russell fund faces downside trade

July 28, 2014

The small-cap exchange-traded fund was at all-time highs above $120 at the start of the month but has been underperforming the other broad-based U.S. equity indexes since.

Premium Services

Education & Strategy

Repairing losers with ratio spreads

Last week we mentioned the "stock repair strategy." This week is a good time to follow up, given the action...

View more education articles »
optionMONSTER stockMONSTER tradeMONSTER