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By Chris McKhann

The Russell 2000 Growth Index is just off its highest levels in more than three years, but the option volume in the iShares fund (NYSEARCA:IWO) is focused in the puts.

The IWO exchange-traded fund is up 0.45 percent this morning to $89.10, just shy of the intraday high of $89.40 set on the first trading day of this year. That would also be the highest close for the IWO since October 2007. Shares have climbed 40 percent since bouncing off long-term support back in August.

Although this ETF isn't a usual options target like its small-cap Russell relative the IWM, it has seen an interesting trade this morning. A trader bought 3,750 February 87 puts for $2 at less than the open interest of 3,972 at that strike. At the same time, 3,750 of the 90 puts were sold for $3.20, with he previous open interest at just 10 contracts.

So this trade could be one of two things. It could be a credit spread that is poised to take its maximum profit if the IWO is above $90 at expiration, or it could be the roll or a short put position from that lower strike to the higher, closing out any gains from time decay in the 87 strike.

In either case the maximum profit comes with shares above that $90 level and the real possibility that the trader is assigned and ends up long shares at $90.

Disclosure: No position

Source: Puts Surge in Small-Cap Growth Fund