Weekend Review – Russell 2000 Options and Volatility – 2/29 – 3/4

The Russell 2000 (RUT) continues to show some resilience rising over 4% last week and closing the 2016 performance gap with the Russell 1000 (RUI).


The long term average for the CBOE Russell 2000 Volatility Index (RVX) relative to VIX has been about 20% which is where we are now.  For some time back in the fourth quarter of last year we spent much more time closer to parity between RVX and VIX.


An interesting trade was executed on Friday around lunchtime, with RUT trading near 1085.  It starts out simple and then gets kind of fun.  A bear call spread was initiated with the RUT Mar 18th 1070 Calls sold for 24.85 and RUT Mar 18th 1090 Calls purchased at 12.39.  The trade was competed as some of the credit taken in on the bear call spread was spent on the RUT Mar 18th 1130 Calls which were purchased for 1.16.  The final result was a credit of 11.30.  The payout in two weeks’ time at expiration appears below.