Russell 2000 ETF draws bearish bet

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The iShares Russell 2000 Fund is pulling back from yesterday's record close, and a large three-way spread is looking for further losses.

A trader sold 20,000 March Weekly 82 puts for the bid price of $0.42 while buying 10,000 each of the 87 and 77 puts for $1.18 and $0.17 respectively, according to optionMONSTER's Depth Charge system. These contracts expire on March 28, a week after the regular monthly expiration.

The trader paid $0.51 to open the position, which is the maximum potential loss if the IWM is above $87 or below $77 at expiration. The maximum gain would come with shares right around $82 at that time.

The strategy, known as a butterfly spread , is a low-cost/low-risk trade. But in this case, it needs both direction and timing to work. (See our Education section)

The IWM is down 0.7 percent at $89.80 this morning after posting an all-time high closing price yesterday. There is support around that $82 level, with the last close below that in November.

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