This Week in Russell 2000 and Nasdaq-100 Volatility – 8/1/2014

VXN rose just under 30% last week, admittedly off a low base, but still that is quite a move. This rise in VXN was slightly less than VIX’s one week change of over 35% which may be attributed to a combination of the concerns weighing on the equity market being somewhat global in nature and the Nasdaq-100 dropping a little less than the S&P 500.


The Russell 2000 has been a laggard this year and is now down more than 4% on the year. The CBOE Russell 2000 Volatility Index (RVX) has reflected this lack of performance by consistently trading at a premium relative to VIX. The premium narrowed a bit last week with RVX rising less than 20%.


Before moving on to the curves I would like to note a trade highlighted in this blog space before the market dropped last week. Someone, in a very timely fashion, purchased 2,200 of the RUT Oct 1010 Puts for 9.50. The reason I bring this up in a space discussing volatility is the benefit that trader got from the move up in the implied volatility of RUT options combined with some price appreciation that came from the drop in the Russell 2000. Late Friday the bid price for the RUT Oct 1010 Put was 14.00. This is a great demonstration of why paying attention to equity index implied volatility and understanding how it changes relative to the underlying market is important for traders that may only focus on index options.

The blog about the RUT trade from earlier this week may be found at the following link –

The curves are both basically mirror images of each other. Both the indexes are at slight premiums to the front month future and then a slight amount of contango beyond the August futures. Friday saw a bit of a catch up for the futures as there was not rebound in the stock market after Thursday’s big drop.

VXN RVX Curves