IYR – iShares Dow Jones U.S. Real Estate Index Fund – The purchase of a debit put spread on the IYR, an exchange-traded fund designed to provide investment results that correspond to the price and yield performance of the Dow Jones U.S. Real Estate Index – an index that measures the performance of the real estate sector of the U.S. equity market, suggests one options player is bracing for continued erosion in the price of the underlying fund through expiration in January 2011. Shares of the ETF are down 2.65% to stand at $50.22 as of 11:55 am ET. It looks like the pessimistic investor purchased 5,000 puts at the January 2011 $48 strike for an average premium of $3.71 each, and sold the same number of puts at the lower January 2011 $40 strike for an average premium of $1.50 apiece. Net premium paid to establish the spread amounts to $2.21 per contract. Thus, the trader responsible for the transaction is prepared to make money – or realize downside protection should the investor hold a long position in the underlying shares – if the fund’s shares fall 8.8% from the current price to slip beneath the effective breakeven point to the downside at $45.79 by expiration day next year. Maximum available profits of $5.79 are available to the trader if the fund’s shares plummet 20.35% to trade below $40.00 by expiration in January 2011. Options implied volatility on the fund surged 15.7% to 31.25% just before 12:00 pm ET.