Yesterday (June 18) was a key day for small-cap instruments, as shown by these facts –
- The Russell 2000 Index (RUT) (the key gauge of for U.S. small-cap stocks) hit an all-time daily closing high of 1284.68;
- The CBOE Russell 2000 BuyWrite Index (BXR) (the key gauge for use of an RUT index options buywrite strategy) hit an all-time daily closing high of on 217.68;
- Daily volume for options on the Russell 2000 (RUT) rose to 131,638 contracts, the highest level in recent weeks.
THREE CHARTS FOR PERIOD OF JUNE 2 – 18
The CBOE Russell 2000 BuyWrite Index (BXR) is a benchmark index that measures the performance of a theoretical portfolio that sells RUT call options against a portfolio of the stocks included in the Russell 2000 Index. While the BXR index hit an all-time record high yesterday, buy-write strategies can do well versus stock indexes in times of sluggish to down equity markets.
The CBOE Russell 2000 Volatility Index (RVX) is a key measure of market expectations of near-term volatility conveyed by RUT index option prices. It measures the market’s expectation of 30-day volatility implicit in the prices of near-term Russell 2000 options
A recent MarketWatch piece titled “Small-cap rally at odds with Fed’s forecast” noted that —
“Record highs in the Russell 2000 and Nasdaq Composite suggest that markets are betting the economy this year will grow at a faster pace than over the past several years. That’s because small-cap stocks usually outperform large-cap stocks when investors believe that the economic growth is expected to accelerate. This price action, however, is at odds with the Federal Reserve’s latest downgrade of its economic outlook. … Small stocks benefited tremendously from the Fed’s accommodative monetary policy. On top of that, investors poured money into small and mid-cap stocks, following the sudden appreciation of the dollar since the middle of last year, which hurt multinationals and their profits. … “