The iShares Russell 2000 Index Fund (IWM) is trading lower today, delivering substantial profits to downside option positions opened on Monday.
On Aug. 29, Market Rebellion’s Unusual Option Activity Service found that 15,000 Weekly $180 puts, expiring on Sep. 9, were bought for $1.17 to $1.18 as part of a bearish spread above the existing open interest of 787 contracts with shares at $188.22.
Those puts traded for as much as $3.63 this session, at least 3 times their purchase prices. The ETF fell by 5.19% 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.
The IWM was last lower by 1.67% at $180.44.
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