Large and small cap stocks had a good week, thanks to a big rally on Friday. The Russell 2000 (RUT) was up by 0.61% while the Russell 1000 (RUI) gained 0.89%. The RUI performance for 2017 is approaching 17% while RUT is now lagging by just over 6.5%.
Both VIX and the Cboe Russell 2000 Volatility Index (RVX) were under pressure with equity market strength last week. The RVX to VIX premium dropped some, but still remains at pretty high levels which has been the norm in 2017
Late Friday, with the Russell 2000 on a tear, a trader came in selling a put spread that expects RUT to hold up next week. With RUT near 1536 someone sold 200 RUT Dec 22nd 1525 Puts for 7.32 and purchased 200 RUT Dec 29th 1505 Puts for 3.07 resulting in a net credit of 4.25. The payout on this coming Friday’s close appears below.
The risk here is a loss of 15.75 with a potential gain equal to the credit of 4.25, of course the trade is safe for about 10 points of weakness.