Today Russell Investments announced exclusive agreements with NYSE Euronext and CBOE Holdings for Russell U.S. index options.
The Russell 2000 (RUT) Index is a leading benchmark for the performance of small-capitalization stocks. CBOE has offered options on the Russell 2000® Index (RUT) since 1992. Today total open interest for RUT options is 809,768 (335,634 calls and 474,134 puts).
HISTORIC VOLATILITY SINCE 1987
During the “dot.com” bubble around the year 2000, many investors associated tech stocks with high volatility. On Jan. 5, 2001, the 30-day historic volatility for the tech-oriented Nasdaq-100 Index (NDX) reached a high of 96.3, while the 30-day historic volatility for the small-cap Russell 2000 Index was a much lower 40.9.
In the years 1987 through 2003, the average 30-day historic volatility was –
- 14.4 for the Russell 2000 Index (RUT)
- 27.4 for the Nasdaq-100 Index (NDX)
However, in the years 2004 through 2012, the average 30-day historic volatility was –
- 24.4 for the Russell 2000 Index (RUT)
- 20.8 for the Nasdaq-100 Index (NDX)
IMPLIED VOLATILITY INDEXES SINCE 2004
The CBOE Russell 2000 Volatility Index (RVX) is a key measure of market expectations of near-term volatility conveyed by Russell 2000 stock index option prices. It measures the market’s expectation of 30-day volatility implicit in the prices of near-term Russell 2000 options. www.cboe.com/RVX
Here are the average daily closing levels for 3 volatility indexes since Jan. 2004 –
- 27.1 RVX – CBOE Russell 2000 Volatility Index
- 23.4 VXN – CBOE NASDAQ Volatility Index
- 18.9 VXD – CBOE DJIA Volatility Index
In light of the information and charts presented above, investors should be aware of the fact that small-cap stocks as a group recently often have been more volatile than tech stocks. For investors looking to protect portfolios or generate high gross premiums in times of low interest rates, this information can be useful.
To learn more about index options strategies for protection and income, please visit http://www.cboe.com/LearnCenter/