Large cap stocks widened the performance spread with small cap stocks with the Russell 1000 (RUI) gaining and the Russell 2000 (RUT) dropping a bit last week. For the year, RUI is up 7.13% while RUT is up 2.94%.
VIX dropped last week, but the CBOE Russell 2000 Volatility Index (RVX) was higher. Admittedly, RVX was up only 0.02 but when combined with the VIX drop of 0.25 the result is a slight widening of the spread between RVX and VIX.
One trader put on a position late Friday looking for RUT to remain within a pretty wide range this coming week. Using the RUT Weeklys the trader sold the RUT May 12th1330 Put for 0.72 and bought the RUT May 12th 1320 Puts for 0.62. To the upside, the RUT May 12th 1435 Call was sold at 0.48 and the RUT May 12th 1445 Call was purchased for 0.22. The net result was an iron condor that took in a credit of 0.36 and a payoff on the close this coming Friday that resembles the diagram below.
The reward is equal to the 0.36 credit received on this trade. As long as RUT is not down more than 4.8% or rallies more than 2.7% this trade will be safe. A large move up or down and the maximum loss is 9.64.