Options Trading News

June 6, 2013  Thu 4:14 AM CT

A big put spread topped yesterday's option activity in the iShares Russell 2000 Fund.

optionMONSTER systems show that a trader bought 19,000 each of the June Quarterly 94 and 82 puts for $1.15 and $0.06 respectively. At the same time he or she sold 38,000 of the 88 puts for their bid price of $0.25.

This butterfly spread cost $0.71 to open, which is the maximum loss on the trade and would be realized if it is held until expiration and shares are either above $94 or below $82. The theoretical maximum gain of $5.29 would be realized with the fund at $88. (See our Education section)

The IWM fell 1.28 percent to $96.43, its lowest close since May 9. The exchange-traded fund, which tracks the small-cap index, was above $100 last week. It has not traded at $88 since mid-January and below $82 since early December.

Total option volume in the IWM was 811,000 contracts yesterday, with puts outpacing calls by more than 2 to 1.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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