The Week for Russell 2000 Trading – 5/4 – 5/8

Small cap stocks played a little catch up last week with the Russell 2000 rising 0.55% while the Russell 1000 gained 0.35%.   Like all broad based market indexes in the US last, the positive performance came from the market’s reaction to Friday’s employment report. Large cap stocks actually ruled the day on Friday with the benchmark Russell 1000 gaining 1.2% while the Russell 2000 rose by about 0.75%. For a perspective on the relative performance of large and small cap stocks in 2015 I put together the chart below.


This chart adjusts both the Russell 1000 and Russell 2000 price performance to start at 100 as of the end of 2014. So far the absolute price change for the 1000 is 3.15% while the Russell 2000 is up 2.51%.  Note for a good part of March and April small cap performance dominated the relationship.

Another big out of the money spread came into the Russell 2000 post on Friday with this trade occurring on the call side of the board. With the Russell 2000 at 1235 and about 30 minutes left in the trading day there was a seller of over 63,000 RUT May 15th 1275 Calls at 0.21 who also purchased the same number of RUT May 15th 1285 Calls for 0.14 and a net credit of 0.07. The result a potential profit of 0.07 or loss of 9.93. However, the Russell 2000 needs to gain over 30 points or about 2.4% to hit the break even level and would need to be 40 points (or more) higher for this trade to result in taking the full loss of 9.93. Finally, remember that RUT options are AM settled so this price move to the upside needs to occur in four trading sessions plus any overnight changes Thursday.

Russell PO