Weekend Review – Russell 2000 Index and Volatility – 3/28 – 4/1

The Russell 2000 (RUT) had a great week rising 3.5% while the large cap focused Russell 1000 (RUI) also did pretty well gaining about 1.9%. For the year RUI went from down to up and is now in the green by 1.23% while the Russell 2000 is still in the red by 1.60%. A repeat of last week and RUT will join RUI in positive territory for 2016.


I put lots of charts together every weekend and there’s always one or two that catch my eye. This week’s is below as despite the outperformance of small cap stocks, the RVX / VIX premium hit a 2016 high. We can attribute that to domestic versus global economic concerns or possibly to a belief that value stocks are less risky than growth stocks.   Whatever the reason, small cap stocks are considered riskier than the norm when compared to large cap stocks.



2016 has been a tough and volatile year for stocks, we all know that. With higher volatility comes higher option premiums which can be a positive for option sellers. I stress can be since it always comes down to the subsequent realized volatility. A systematic RUT strategy that held up well relative to the total return for the Russell 2000 in the first quarter was the CBOE Russell 2000 One-Week PutWrite Index (WPTR). The chart below shows how the first quarter went for the total return of the Russell 2000 versus WPTR. As I am prone to do I have indexed both to 100 to begin the year. Note both a lower as of March 31st, but WPTR which systematically sells weekly at the money RUT puts against a portfolio of cash beat buy and hold by 0.74%.


Finally, a brief plug – if you want to learn more about all the strategy indexes created and calculated by CBOE check out www.cboe.com/benchmarks