As the Russell 2000 (RUT) continues to move into uncharted territory at least one trader believes 1500 is not achievable. At least not through standard March (3/17) expiration. Early today when RUT was around 1393 (much lower than today’s close) a pretty big trade came into the RUT post. Specifically, they was a seller of 37,601 RUT Mar 1490 Calls at 1.42 who then purchased 37,601 RUT Mar 1510 Calls for 0.95. The result is a net credit of 0.47 and a payoff at RUT AM settlement on March 17th that looks like the diagram below.
In order for this trade to be in trouble RUT needs to move up about 7% from where the small cap benchmark was when the trade went off. A move to 1510 or 8.4% from this morning’s RUT price is the worst case scenario with the resulting loss coming in at 19.53.