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Mid-cap fund draws big put spread

Chris McKhann (chris.mckhann@optionmonster.com)

A big put spread is positioning for a potential drop in the S&P 500 Midcap 400 Fund.

optionMONSTER's Depth Charge system shows that a trader bought 10,000 August 250 puts for $1.90 and sold the same number of August 235 puts for $0.45 today. Volume was more than twice the previous open interest in each strike, so this is new positioning.

The trader pays $1.45 on this vertical spread , which is the maximum amount at risk. The position stands to make $13.55 if the MDY is below $235 at expiration in mid-August. The delta of the 235 puts suggests that there is just a 6 percent probability of that happening. (See our Education section)

The MDY is down 0.28 percent to $256.14 in midday trading. The exchange-traded fund was at an all-time high of $264 two weeks ago and was last below $235 in early February.

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