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Small Caps (IWM) - Expected moves, bearish spreads. Credit or debit? It depends.
2 min read

Small Caps (IWM) - Expected moves, bearish spreads. Credit or debit? It depends.

Small Caps (IWM) - Expected moves, bearish spreads. Credit or debit? It depends.

  • The Russell 2000 got hit harder and has recovered less than the S&P 500 and Nasdaq Comp.
  • Using expected move levels of IWM - iShares Russell 2000 in two types of trades for those looking for outright index short exposure or as portfolio hedge.

The Set-Up

IWM vs the S&P 500 and Nasdaq Comp YTD, from TradingView:

IWM - 2 month expected move from OptionsAI technology:

Unusual Options Activity

IWM is seeing large volume in the May 15th 113 and 101 lines, with over 5,000 trading in both, possibly a put spread for ~$1.60. It's impossible to know intent, it could be a hedge or outright. It's breakeven begins about where the expected move and captures movement below. From OptionsAI technology:

Obviously that is a fairly short time frame. For those looking for some bearish exposure or a portfolio hedge on a longer time frame, targeting the expected move in June produces several potential spreads on OptionsAI technology:

The (bearish) long 121/108 put spread offers about a 1/2 risk reward and a 39% probability of profit and the (bearish) short 121/134 call spread offers about 7/6 risk reward and 59% probability of profit. Those probabilities are based on the breakeven of each trade. The short call spread has room above (where it is still profitable), the long put spread needs IWM to go down before it is profitable (at expiration).

These are two different strategies and give optionality of whether one is "bearish" or simply "not bullish".

Give OptionsAI technology a try with your own price target in AAPL HERE

Actionable Insights from the Options Market

Earnings event expected moves
Unusual activity alerts
Spread trade education

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