Small cap ETF trader I.W.M. People may be nervous ahead of Thursday’s set of U.S. economic data, including the latest reading of the Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred measure of inflation.
It was up 40% in the past year, compared to 27% the year before. S&P500 and 39% Nasdaq-100 – Option traders russell 2000. Put trading activity accounted for more than 70% of all option premiums exchanged on Wednesday, compared to 60% in 2018. QQQ and less than 40% spy.
According to ThinkOrSwim data, the trading volume of put contracts is almost three times higher than that of calls, with more than 380,000 put contracts likely to be purchased compared to less than 270,000. In contrast, calls and puts were roughly evenly distributed on SPY.
The bearish trend could reflect nervousness about the relationship between the Russell 2000 and interest rates, given that small-cap indexes have a high proportion of unprofitable companies, and this group may be particularly susceptible to spikes in U.S. Treasury yields. Still, bonds have rebounded for six days after yields hit multi-year highs last week.
Thursday’s economic data will include weekly jobless claims, durable goods orders, an update on U.S. GDP and an update on personal consumption spending.
In one prime example of Wednesday’s bearish trading, a trader bet that IWM would fall 7% by mid-July, buying $11.4 million of 277 puts expiring on July 17th and selling $3.6 million of 271 strike puts expiring on June 18th for about $8 million in a long spread trade.
