Weekly Review – Russell 2000 Options and Volatility – 12/14 – 12/18

Small cap stocks continue to languish relative to large cap stocks for 2015.  The Russell 2000 (RUT) was down 0.23% while the Russell 1000 (RUI) lost 0.35% last week.  RUT is down 6.95% for 2015 while the large cap oriented RUI is down only 2.94%.  It’s going to take a small miracle for RUT to close the gap over the next two holiday shortened weeks.

RUT RUI

The CBOE Russell 2000 Volatility Index (RVX) rebounded relative to VIX last week but finished very close to parity.  This has been unusual in the past, but seems to becoming a more normal occurrence.  Especially in periods of elevated volatility as we seem to be experiencing.

RVX VIX

One trader on Friday is looking for RUT to continue lower into the open on Christmas Eve day.  With RUT at 1121 there was a buyer of the RUT Dec 24th 1110 Put at 6.45 who sold RUT Dec 24th 1080 Put at 1.28 paying 5.17 with an expectation that RUT will be about 1.4% lower by Thursday morning.  The best case scenario is a drop of around 3.6% and a net profit of 24.83.

RUT PO