Small cap stocks lost some of the recently gained ground relative to large cap stocks last week. The Russell 2000 (RUT) was down over 1% while the large cap focused Russell 1000 (RUI) was up slightly. The spread of RUI to RUT out performance for 2017 has now widened to almost 5%.
Despite the tough week for small cap stocks the CBOE Russell 2000 Volatility Index (RVX) finished Friday at a 2017 low. This lower relative level for RVX pushed the RVX to VIX ratio to the lowest levels since both volatility indexes rose as the US equity markets came under pressure in the middle of last month.
RUT was under pressure relative to large cap indexes on Thursday. Another of those deep out of the money RUT put spread sellers showed up in the afternoon selling the RUT Jun 23rd 1370 Puts for 2.97 and purchasing the RUT Jun 23rd 1320 Puts for 0.97 and a net credit of 2.00. As long as RUT finished next week above 1370 the trade will work out with a profit equal to the 2.00 credit. Of course this trade has some real potential downside and RUT at 1320 or below would result in a loss of 48.00 per spread.