Large put spread targets Russell 2000

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The iShares Russell 2000 Fund is down even as though the S&P 500 has rebounded into positive territory for the day, and one trader sees the small-cap index heading lower.

The IWM is down 0.33 percent to $79.07 in early afternoon trading. The exchange-traded fund climbed near $82 last week, which was a bit shy of its 52-week high above $84 from the end of March. Shares were down at a 2012 low under $73 at the start of June.

A trader bought 12,650 October 78 puts for $3.80 and sold the same number of October 70 puts for $1.54, according to optionMONSTER's Depth Charge system. The volume at each strike was well above open interest at the start of the day, so this is a new put vertical spread .

The trader spent $2.26 to open the position, which is the amoutn that will be lost if the spread is held until expiration and the IWM is above $78. The maximum potential gain of $5.74 would come if the IWM is back below $70, a level not seen since last November. (See our Education section)



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: IWM , RUT

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