Weekend Review – Russell 2000 Options and Volatility – 6/13 – 6/17

Despite global concerns dominating the market chatter last week, large cap stocks outperformed small cap stocks. Both were lower as the Russell 1000 (RUI) lost 1.16% while the Russell 2000 (RUT) gave up 1.65%. RUI widened the lead on RUT and is now up 1.33% for 2016 while RUT is still higher, but by only 0.78%.


The CBOE Russell 2000 Volatility Index (RVX) rose last week, but not nearly as much as the gains we saw from VIX. As global concerns entered the marketplace, the RVX / VIX ratio dropped to levels not seen since February, before rebounding slightly to end the week.


Late Friday, with RUT at 1141.38, an option trade came to the RUT post that is looking for a slightly higher levels for the Russell 2000 just before the long Independence Day holiday. Specifically, the trader sold the RUT Jul 1st 1150 Puts for 22.93 and then bought the RUT Jul 1st 1140 Puts for 18.63 and a net credit of 4.30. The ultimate goal is for the Russell 2000 to be over 1150 and both puts to expire out of the money.