Mama Tomato and Baby Tomato are walking down the street.  Moma Tomato keeps getting upset because Baby Tomato keeps falling behind.  She finally stops, walks back to Baby Tomato and squashes him.  “Catch up” she says and continued on her way. 

That’s what small cap stocks did this past week, a little catch up, as the Russell 2000 (RUT) was up 1.9% last week while the Russell 1000 (RUI) gained 0.33%.  The spread for the year narrowed, but RUI is still 6.2% higher while RUT is up 2.53%. 

RUT RUI

The CBOE Russell 2000 Volatility (RVX) Index put in a multi-year low on both Thursday and Friday last week.  The result was a compression of the spread between RVX and VIX to the lowest levels seen since mid-November of last year. 

RVX VIX

Finally, a trade that I believe is the beginning of a multi part trade from Friday.  With the Russell 2000 around 1381 (early in the day) there was a buyer of 100 RUT Apr 28th 1380 Puts for 26.00 who sold 100 RUT Apr 13th 1360 puts for 12.15 and a net cost of 13.85.  Below is the estimated payout at expiration on April 13th.

RUT PO

On April 13th the short 1360 put will go off the board and if it is in the money our trader will experience a debit.  They will also have a choice of holding their long put for two more weeks or maybe selling another RUT put and taking in more premium.