Weekend Review – Russell 2000 Options and Volatility – 9/12 – 9/16

Both the Russell 100 and Russel 2000 were up 0.48% last week.  For the year RUT maintains a lead of 3.10% (7.83% vs. 4.73%).


Both VIX and the CBOE Russell 2000 Volatility index (RVX) lost value last week.   This took the RVX / VIX premium down to under 20% for the first time since June.


First thing Friday, with the Russell 2000 around 1225, someone came into the RUT pit with a trade that is targeting a fairly wide range for the Russell 2000 at the end of the month.  The trade is an Iron Condor which sold the RUT Sep 30th 1185 Put for 8.53 and purchased the RUT Sep 30th 1180 Put at 7.67.  On the upside this trade sold the RUT Sep 30th 1260 Call at 2.95 and purchased the Sep 30th 1265 Call for 2.23.  After doing on the math this trade results in a credit of 1.58.


As long as the RUT is not up more than 4.5% or 3.3% lower this trade will be ok, a big outlier move and the resulting loss will be 3.42.