Small-cap fund faces downside trade

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As the iShares Russell 2000 Index Fund trades just off this week's all-time highs, a large position is looking at the downside.

More than 303,000 IWM options have changed hands so far today, already almost at its total daily average for the last month. Topping the action is a three-way combination trade in the March Quarterly strike.

optionMONSTER systems show that a trader bought 10,000 of the 86 puts for $1.41 and, at the same time, sold 10,000 of the 80 puts for $0.43 and 10,000 of the 94 calls for $0.41.

The volumes were more than open interest at all but the lower put strike, but this appears to be a put spread collar. This would suggest that the trader is paying $0.57 to open this position against long shares to protect against a pullback, at least down to $80.  

The IWM, which tracks the small-cap Russell 2000, is up 0.28 percent to $89.22 in midday trading. Shares have been climbing from support at $76 last tested in mid-November and closed at $90.05 on Tuesday, a new all-time high.

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