As the market slumped on Thursday, one options trader took action and placed a trade on a two percent ?iShares Russell 2000 ETF fall by May.
According to Bloomberg, the trader purchased?40,000 bear contracts on the May ETF?(IWM:US) with a??$113 strike price, while simultaneously selling the exact number of May $107 puts through the strategy of a put spread.
For each contract, the trade had a $1.33 cost and overall, it’s a?$5.3 million trade.??
Fred Ruffy, a senior options strategist at Trade Alert LLC, said to Bloomberg,??It might be a short-term hedge for fear of further market losses over the next five weeks.? ?
The two contracts in the spread had the highest options volume among on the Russell 2000 on Thursday and should the trade decline to $111.67, Ruffy added it will be a profitable one, noted Bloomberg.?
On Thursday, the ETF closed at $111.96 and on Friday, its fall has continued as it’s trading at $109.87, down 1.78 percent. Year-to-date, it’s off 4.45 percent.?
As the market nears the end of the week, the Nasdaq Composite Index (COMP) is off 58 points (1.43 percent) and the S&P 500 (SPX) is down 18 (0.99 percent)–both session lows.
The VIX is at 17.37, up 9.25 percent on Friday. ?