Weekend Review – Russell 2000 Index and Options – 7/11 – 7/15

It was quite a week for small cap stocks as the Russell 2000 (RUT) rose 2.4% while the Russell 1000 (RUI) gained 1.5%.  This strong week for RUT places the index up 6.11% for 2016, a tad more than RUI’s 2016 gain of 5.71%.   Even more impressive for RUT, the small cap index is up 26.4% since putting in a closing low of 953.72 back in February.

RUT RUI

In the volatility space both VIX and the CBOE Russell 2000 Volatility Index were lower last week.  The RVX / VIX premium ratio also moved a bit lower, but remains at pretty elevated levels.  One type of thing that normally pushes RVX / VIX down involves a geopolitical event so it will be interesting to see where this measure begins the week.  I’ll be sure to have CBOE tweet anything that is of interest around this relative risk measure.

RVX VIX Chart

 

Finally, a trader placed a bearish ratio spread on Friday that is looking for RUT to give back some of those gains over the next few weeks.  With RUT near 1201 they purchased the RUT Aug 5th 1180 Put for 9.05 and then sold twice as many RUT Aug 5th 1155 Puts for 4.55 each which results in a credit of 0.05 per spread.  If the trade is held to expiration our ratio spread trader will have a profit as long as RUT is above 1129.95.

RUT PO Fixed