IWM Options Signal Deep Put Bias Amid Bullish Long-Term Setup: Trade the $235 Put Play for Friday's Expiry

• IWM at 252.37, down 0.58% with volume spiking to 20.4M shares
• Put/call OI ratio at 2.38 shows massive bearish positioning below $230
• Block trades show $128M bought in 220-strike calls in September
• RSI at 75.8 suggests overbought conditions but price near 30D MA support

Here's what's happening: The options market is screaming bearish in the short term while technicals hint at a long-term bull setup. Let's break down why this creates a unique trade window.

The Bearish Put Overload and Hidden Bullish Contradiction

The options chain shows 143,071 puts open at the $200 strike and 133,231 at $235 - that's 31% of total put OI concentrated below $230. Meanwhile, call OI peaks at 65,186 for the $270 strike. This creates a "bear trap" pattern where big money is hedging a potential drop but calls remain available for breakout plays.

The block trades tell another story. A $128M purchase of IWM20250919C220 calls in September suggests institutional buyers were confident in a rebound. Now with price near 30D MA support at $244.60, we're seeing a classic "buy the rumor, sell the news" setup.

News That Could Flip the Script

Small caps are riding the Fed rate-cut narrative, with IWM outperforming MAG7 by 5% recently. But here's the twist: while 40% of Russell 2000 companies reported negative Q3 earnings, the index still hit all-time highs. This disconnect between fundamentals and sentiment creates volatility - perfect for options plays.

The crypto correlation angle adds another layer. Past Russell 2000 breakouts have preceded Bitcoin rallies, but weak earnings could limit upside if the trend falters. Watch how the market reacts to Friday's jobs report - a soft print could trigger a short-covering rally.

Actionable Trades for TodayFor Options Traders:

• Aggressive Play: Buy IWM20251219P235 puts at $2.85 premium. Target $225 if price breaks below 200D MA at $208.01
• Conservative Play: Sell IWM20251219C260 calls at $1.20 premium. Collect premium if price holds above $245 support
• Next Friday Setup: Buy IWM20251226P230 puts at $3.10 if price tests $244.60 support

For Stock Investors:

• Entry Alert: Consider buying IWM near $245 if price bounces off 30D MA. Set stop-loss below $240
• Breakout Play: If price closes above $255.68 (today's high), target $265-270 range
• Hedge Strategy: Buy 2-3% puts at $235 strike to protect long positions

Volatility on the Horizon

The market is balancing on a knife edge. While RSI at 75.8 suggests a pullback is due, the long-term MACD (3.48) and 200D MA at $222 show underlying strength. This Friday's expiry could see a test of $245 support - hold your breath. If the Russell holds, we might see a classic "V-shaped" recovery fueled by short-sellers scrambling to cover.

Remember: This is a high-conviction trade. The put/call imbalance shows fear, but history teaches us that extreme bearishness often precedes surprise rallies. Keep a tight stop and watch those Bollinger Bands - price is currently at the 244.73 middle band, which could become dynamic support/resistance.

Final Call: Position yourself to profit from both scenarios. Buy the $235 puts for Friday's expiry while keeping a small position in the $260 calls. The market's about to pick a direction - and you'll be ready.