The Nasdaq-100 rose over 2.5% last week. Over 20% of NDX’s performance is based on two stocks – Apple (AAPL – 97.98) and Microsoft (MSFT – 44.79) – both of which rose about 3.5%. Whatever the reason, NDX was strong and VXN was over 20% lower on the week.
The Russell 2000 was the laggard of the three broad based indexes that have volatility trading available and was higher by just under 1%. For comparison sake, the S&P 500 rose 1.22% last week. RVX continued to narrow the gap with VIX dropping 2.88 while VIX was down 2.62. The first half of 2014 was not good to small caps relative to other market sectors and RVX was elevated relative to VIX. Over the past couple of weeks the spread has narrowed which can be taken as the market saying the small cap underperformance may be a thing of the past.
There are only two trading days remaining until August volatility futures and options expire on the open this coming Wednesday. The premium of the August VXN contract relative to the index (0.48) sort of caught my eye, especially since VXN was down so much last week. It will be interesting to see if the futures premium has it right which would me VXN moves up a bit over the next couple of days. The story is the same with RVX, but there has been a higher risk perception for small cap stocks so that one doesn’t surprise me as much as the VXN futures premium.