This Week in Nasdaq-100 and Russell 2000 Volatility – 12/6/2013

Not all broad based stock market indexes act the same and last week was one of those weeks where there was a disconnect among the S&P 500 (down 0.04%), NASDAQ-100 (up 0.47%) and the Russell 2000 (down 1.01%).  Despite the dichotomy between NDX and RUT, the two volatility indexes were more in line with each other.  VXN rose 6.6% and RVX was up by almost 5%.

Last week RVX option trading debuted and there were a couple of decent size trades worth mentioning.  On Wednesday someone came in and bought 50 of the RVX Jan 18 Puts at 0.58 and then sold 50 of the RVX Jan 17 Puts for 0.23 which comes to a net cost of 0.35.  If held through January expiration the hope is for RVX to close at 17.00 or lower and a resulting profit of 0.65.

Also on Wednesday a trader bought two different strangles with two different expiration dates.  Starting with the January trade the trader bought 250 of the RVX Jan 18 Puts at 0.50 and also bought 250 of the RVX Jan 25 Calls at 0.90.  They also have an opinion about February and bought 250 of the RVX Feb 18 Puts for 0.55 and then bought 250 of the RVX Feb 30 Calls for 0.65.  The strangles will be worth keeping an eye on.