Bears score fast profits in $IWM

The iShares Russell 2000 Index Fund (IWM) retraced some of its recent gains today, delivering substantial profits to downside option positions opened only yesterday morning.

Just yesterday, Market Rebellion’s Unusual Activity programs flagged the purchase of 64,000 Weekly $92 puts expiring this Friday, Apr. 3, for $0.08 to $0.12 with shares at $116.11. This was clearly a new position, as open interest in the strike was a mere 1,601 contracts before that session began.

Those puts traded for as much as $0.35 earlier this morning, about triple their purchase prices. The stock fell by 6.42% in the same time frame, illustrating the kind of leverage that can be achieved with options.

Long puts lock in the price where a stock can be sold no matter how far it might drop, gaining value in a selloff with the potential for significant leverage. The contracts can be purchased either as an outright bearish bet or a hedge on a long-stock position.

IWM was last lower by 5.94% at $107.66. The index ETF tracks the Russell 2000 which fell today, retracing some of its recent gains from the past week.