Last week I noted that December has traditionally been a good month for stocks, especially small cap stocks. That blog can be found at The Week in Russell 2000 Trading – 11/16 – 11/20. RUT appeared to get a head start on things last week by rallying over 2% while the Russell 1000 (RUI) was up by only about 2 points. RUT is now a rounding error from up on the year and still lags RUI by about 1.5%.
With the relative rally in RUT the RVX / VIX premium dropped to levels not seen in a couple of months. We could take that as traders expecting good things out of small caps to end the year. That doesn’t mean they are right, that just means they have an expectation.
Wednesday’s trading activity was pretty tame, but it did bring out at least one spread trader. Looking out a couple of weeks to the December 11th expiration there was a seller of the RUT Dec 11th 1180 Puts at 8.33 who also bought the Dec 11th 1170 Puts at 5.98 and a net credit of 2.35. This was done pretty early in the day when RUT was trading at 1193.27.