What's behind put action in small caps
Chris McKhann | firstname.lastname@example.org
optionMONSTER systems show that a trader sold 2,058 May 870 puts for $3.80 and bought 4,116 May 790 puts for $0.25. This is a so-called backspread that is mainly focused on keeping the net credit of $3.30, which will the profit if the RUT is above 870 at expiration. But the additional lower-strike puts mean that this can also profit if the index drops sharply. (See our Education section)
The RUT is up fractionally at 945.16 in early afternoon trading. The index has been climbing back toward its all-time high of 954 set earlier in the month.