This 1 Unusually Active IWM Put Option Screams Covered Strangle

Group 1 - The Federal Reserve cut its key federal funds rate by 0.25% to a range of 3.5%-3.75%, with projections indicating only one more cut in 2026 due to slowing job growth and persistent inflation [1] - Following the interest rate cut, stocks surged, with the S&P 500 and Nasdaq 100 reaching six-week and five-week highs, respectively [1] Group 2 - In unusual options activity, the top 25 ETF put options by volume-to-open-interest ratios showed significant interest, particularly in the iShares 7-10 Year Treasury Bond ETF (IEF) and the iShares Russell 2000 ETF (IWM) [2] - Small-cap stocks, represented by IWM, have performed strongly, with an increase of 8.15% since November 21, and an 88% outperformance compared to the SPDR S&P 500 ETF (SPY) over the same period [2] Group 3 - IWM had three active put options with volume-to-open-interest ratios above 10, indicating notable trading activity despite a bearish put/call open interest ratio of 2.44 [3] - The Jan. 16/2026 $243 strike put option for IWM had a volume of 57,033, which is 14.02 times the open interest, highlighting significant market interest [4] Group 4 - The covered strangle strategy combines a Covered Call and a Cash-Secured Put, allowing traders to generate income while managing exposure to the underlying asset [5] - This strategy is not solely focused on income generation; it also provides a systematic approach to managing exposure, allowing for increased long exposure at lower prices if the underlying asset falls, or trimming exposure and realizing gains if it rises [6][7]