Bulls score fast profits in $IWM

The iShares Russell 2000 Index Fund (IWM) bounced sharply off its lows today, delivering substantial profits to upside option positions opened only a day before.

Just yesterday, Mar. 23, Market Rebellion’s tracking systems found that 3,000 Weekly $105 calls expiring on May 1 were bought for $5.24 with shares at $98.52. This was clearly a new position, as open interest in the strike was only 10 contracts before the trade occurred.

Those calls traded for as much as $9.99 today, nearly double their purchase price and ended the session marked for $10.88. The stock rose 10.14% in the same time frame, illustrating the kind of leverage that can be achieved with options.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

IWM was up 9.15% to close at $109.04 today. The index ETF tracks the Russell 2000 which bounced back strongly today along with the rest of the market as stimulus measures continue to be weighed by Congress to stem the economic effects of the COVID-19 virus.