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Traders bet the Russell's run is just getting started

Key Points
  • Traders are making bullish bets on the iShares Russell 2000 ETF (IWM) and Michaels Companies, according to trader Jon Najarian.
  • On Tuesday investors bought more than 10,000 IWM calls at the August 168 strike price.
  • The Russell 2000 hit a new all-time intraday high of 1,663.90 during Tuesday's trading session.

On Tuesday the Russell 2000 hit a new intraday all-time high, and investors are betting the run is just getting started.

So far this week traders have bought more than eleven thousand IWM calls at the August 168 strike price, according to Investitute.com co-founder and "Halftime Report" trader Jon Najarian.

The IWM, which tracks the Russell 2000, is up nearly nine percent this year. It closed at $164.71 on Monday, so it will need to rise another 2% to hit that key $168 level.

These particular calls expire on August 17, which means that as long as the ETF trades above $168 by then, the traders can exercise their right to buy the ETF at a lower price and collect a profit (minus the cost to purchase the option).

Bulls bet on small caps, this retailer

Small-cap stocks have rallied this year, outperforming the broader market -- the Russell 2000 is up more than 7% in the past three months, compared to the S&P's 1% gain in the same time period.

Since small cap companies are domestically focused, they aren't necessarily as impacted by factors like a strong US dollar or geopolitical tensions.

Traders are also betting on Michaels Companies. On Tuesday investors bought more than three thousand calls at the June 20 strike price. The retailer, which has fallen more than 20% this year, closed at $19.02 on Monday.

Jon Najarian owns IWM and MIK calls.