While the financial world as we know it is rejoicing in the new all time highs in the S&P 500 (SPX) and the Dow Jones Industrial Average (INDU) made this week, the Russell 2000 (RTY), the small cap index remains 7.5% off of its made in mid 2015:
The relative under-performance from its highs to its large cap brethren might become an issue if the index were to re-test the long term uptrend that has only been breached once (in Q1 2016). A look at the three year chart of the RTY shows what is an apparent consolidation between 1050 and 1250, but by taking more of a glass half empty view, a failure at current levels and a break below 1100 could confirm a building head and shoulders formation:
Which brings me to some unusual options activity in the IWM, the iShares Russell 2000 rtf that tracks the small cap index, where put volume ran nearly 3x that of calls today, with much of the activity apparently roll bearish positioning which could also be rolling of hedges. This is what we saw:
At 11am, when the etf was $119.71, a trader sold to close 25,000 IWM Aug 114 puts at 86 cents and bought to open 20,000 of the Sept 30th quarterly 118 / 110 put spreads for 1.90.
Also when the etf was $119.21 shortly after 3pm it appeared a trader rolled up some puts, Selling to close 15,000 of the Dec 30th quarterly 100 / 95 put spreads at 49 cents and bought to open 35,000 IWM Dec 30th quarterly 111 puts for $3.51 to open.
Regular readers know that we do not place a whole heck of a lot of emphasis in unusual options activity as without any intimate knowledge of the trader, or the trader’s inclination it is nearly impossible to guess what the options trade may represent, an out right directional view, leverage or possibly a hedge?
But the activity, as it did in this case often causes us to take a closer look at the underlying and sometimes offers a sense towards investor sentiment.