Option players went on the defensive and accumulated puts in a number of ETFs that track major stock indexes, reports Doris Frankel of Reuters. Option analysts and traders watched as U.S. stocks fell after the U.S. Labor Department reported that job creation practically came to a standstill in December and unemployment rose to a two-year high of 5%. A grim jobs report put many in a worrisome frame of mind and left them concerned about the well-being of the U.S. economy.
In an attempt to protect their portfolios from more selling, many investors bought up puts attached to the iShares Russell 2000 Index Fund (IWM), the Nasdaq 100 Index Tracking Stock, and the SPDRs S&P Depository Receipts.
Puts allow investors to sell the shares of the underlying ETF at a given price and time. Often, they are used to hedge their exposure from further share losses in the ETF or to make bearish bets to profit from another move lower.
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