Carter Worth And Mike Khouw's IWM Trade

On CNBC's "Options Action," Carter Worth shared with the audience his technical view on iShares Russell 2000 Index IWM. He said the ETF is trading at its strong resistance and he sees the situation as a classic example of a rally to a difficult level.

Worth is concerned because he spotted a double top pattern in IWM as it failed to break its 2018 high. The ETF is also heavily weighted to financials, which Worth sees as a problem. Its relative performance to the S&P 500 is also poor and it peaked in 2016.

Mike Khouw wants to make a bearish bet by purchasing the August $130/$110 put spread for a net debit of $4.30. The trade breaks even at $125.70 or 9.5% below the current stock price. It can maximally make a profit of $15.70.