Block Trade Analysis – OTM Russell 2000 Bear Call Spread

The recently blocks I’ve written up in the Russell 2000 tended to be trades in short dated out of the money put options. Despite being on the put side of the equation these big trades were bullish spreads. Typically the Russell 2000 would need to drop several percentage points for those trades to turn sour. Well today it appears someone turned the tables and decided to go with an out of the money bear call spread. Over 64,000 RUT Mar 20th 1280 and 1290 Calls traded today and the best I can tell (I’m on the road for CBOE this week) is that a credit of 0.10 was taken in for selling the 1280’s and buying the 1290’s. A payoff diagram at next Friday’s RUT AM settlement appears below.


The dollar risk reward is a gain of 0.10 for a potential loss of 9.90, but the RUT needs to rise over 3.5% before broaching the break-even level for this trade of 1280.10. About a 4.3% gain for the Russell 2000 would be needed for this trade to turn into a 9.90 loss.   One other piece of information worth sharing is that the all-time high for the Russell 2000 is 1242.62 with that record being set in early March so the record high for RUT needs to be taken out as well for this trade to turn into a loser.