A big early print in the iShares Russell 2000 ETF (Ticker: IWM) on Thursday may be a short-term hedge to protect against further market losses during the next five weeks. The options market participant appears to have purchased the regular May $107/$113 bear put spread 40,000 times for a net premium of $1.33 per contract. The trade starts making money if shares in the small-cap ETF decline 2.7% from the current price of $114.78 to trade below the effective breakeven point at $111.67. Maximum potential profits of $4.67 per contract are available on the spread should shares in the IWM drop 6.8% to $107.00 by expiration next month.
Note: At the end of the day, IWM was at 111.96, down 3.29(2.86%). ~ Ilene
