$IWM option bears score

The iShares Russell 2000 Index Fund (IWM) is trading lower today, delivering profits to downside option positions.

On Aug. 10, Market Rebellion’s Unusual Option Activity Service found that 41,500 October $183 puts, expiring Sep. 29, were bought as part of a bearish roll for $3.17 to $3.18 with shares at $191.71. This was clearly fresh buying, as open interest in the contract was just 1,079 before the activity appeared.

Those puts have traded for as much as $8.81 this session, a 177.04% return, while the stock fell 8.97% in the same time frame, illustrating the kind of leverage that can be achieved quickly 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.

AMZN was last down on the session by 0.93% at $175.99.