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.
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