Small caps have been lagging recently, and now the bears are
optionMONSTER's trade scanners detected heavy buying in the January
32 calls in the ProShares UltraShort Russell 2000 exchange-traded
fund, which moves twice as much as the benchmark small-cap index
but in the opposite direction. More than 7,700 of the calls were
purchased for $0.05 against previous open interest of just 41
contracts, clearly indicating new activity.
lock in the price where the TWM can be purchased. The trade is
bearish because the fund moves inversely to the broader market,
with the potential to generate significant leverage from a selloff.
The TWM is up 0.95 percent to $13.67 in morning trading. The
decision to bet against the Russell 2000 comes after the index rose
less than 2 percent in the last month, compared to a gain of more
than 4 percent for the S&P 500 and Nasdaq 100. The RUT had
outperformed over long time frames, so the investor apparently
thinks that money is rotating away from small caps.
Total option volume in the TWM is 8 times greater than average so
far today, with calls outnumbering puts by more than 200 to 1.
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