IWM Options Signal $260 Bull Call Play Amid Bearish Put Skew – Here’s How to Position for Volatility

• IWM trades at $252.29, down 0.5% with volume surging to 14.4M shares
• Put/call open interest ratio hits 2.14, showing heavy bearish positioning below $251
• Block trades reveal $128M call buying at $220 strikes (Sep 2025 expirations)
• Technicals hint at potential $258.44 breakout level with 3-month 2.43% upside forecast

The options market is sending a mixed but actionable signal for IWM: While bearish sentiment dominates with puts stacked below $251, bullish money is clustering at $260+ calls. This creates a high-probability setup for traders who can navigate the tightrope between these forces.Bull Call Pressure vs Bear Put Defense

Looking at open interest, the call skew peaks at $260 (OI: 10,206) and $265 (OI: 9,184) for Friday expiration, while puts pile up at $251 (OI: 5,028). This suggests two camps:

• Bullish institutional money is hedging a potential breakout above $258.44
• Bearish retail flows are bracing for a drop toward 200D support at $208

The block trades tell a similar story. A $128M call purchase at the $220 strike (IWM20250919C220) in September shows big players were accumulating cheap premium ahead of earnings season. Now, with the ETF trading near its 30D SMA of $245.52, those positions could force a short-covering rally.

News-Driven Momentum: Fuel or Foe?

Recent headlines paint IWM as a small-cap leader with improving breadth. The ETF's 3-day winning streak and 55.8% participation above 20DMA align with the bullish options flow. But here's the catch:

• Volume has shrunk by 6M shares despite the rally
• MACD histogram turned negative (-$0.11), hinting at near-term exhaustion

This creates a "glass half full" scenario. The news supports the case for a $258.44 breakout, but the shrinking volume means traders should keep stops tight. If the ETF can hold above its 100D SMA ($240.295), the bullish case strengthens significantly.

Actionable Trade Setups

For options traders, the most compelling play is the IWM20260102C265 call (next Friday expiration). Here's why:

• Current price is within $1 of the 200D SMA support
• $265 is the second-highest OI level for next Friday
• If IWM breaks above $258.44, this call could capture 5-7% gains

Stock traders should consider:

• Entry: $250.34 (30D support level) if price holds above 20DMA
• Target: $258.44 (breakout level) with 3.2% potential
• Stop: Below $241.70 (lower Bollinger Band)

Volatility on the Horizon

With 58M put open interest versus 27M calls, the market is clearly pricing in downside risk. But the technicals tell a different story: IWM is in a long-term bullish trend with all major moving averages below price. The coming week will test whether the bears can push the ETF below $240 or if the bulls will force a breakout above $258. Either way, this $12 range offers rich opportunities for those who can read the crosscurrents of options flow and technical structure.