Weekly Review Russell 2000 Options and Volatility 2/16 – 2/19

Small caps had a great holiday shortened week with the Russell 2000 (RUT) rising almost 4%.  RUT also played some catch up with the Russell 1000 (RUI) as the large cap benchmark was up a little less than 3%.  However, RUT has a long way to go to catch up with RUI for 2016.  However, there’s a lot of trading left to be done for 2016.


The CBOE Russell 2000 Volatility Index (RVX) and VIX both dropped dramatically last week.  However, they dropped in line with each other and RVX remains at what has historically been a premium of about 20%.


Late Friday there was quite an interesting short term trade that was executed at the RUT Post at CBOE in the form of an imbalance short risk reversal (that’s the best I can do with a label here). There was a seller of 300 RUT Feb 26th 1040 Calls at 1.40 who purchased 450 RUT Feb 26th 950 Puts at 0.90.  This all happened with RUT trading around 1007.  The net result, excluding commissions, is a credit of $1500.   To keep things simple the diagram below shows the dollar payout (in 1,000s of dollars) at different levels at expiration.