Last week the Russell 2000 (RUT) took it on the chin dropping 2.6% while the large cap focused Russell 1000 (RUI) was down only 0.80%. For the year RUT still has a small lead, up 4.55% versus up 3.98%, but that could quickly disappear next week.
The volatility spike that came Friday afternoon did what most surprising events do to the relationship between the Russell 2000 Volatility Index (RVX) and VIX. The ratio dropped, but is still above average for 2016.
The week ended for the RUT pit with a pretty interesting trade that expires almost a week from when it was executed. The trade was a 2 x 3 where 2 RUT Nov 4th 1195 Calls were purchased at 8.81 each and then 3 RUT Nov 4th 1205 Calls were sold at 4.64 each. This comes to a cost of 3.70 per spread and RUT was at 1188.05 at the time of the trade.
This trade is looking for an upside move for RUT of between 0.9% and 2.8%. The best case scenario is for RUT to land at 1205.00 on the close next week which would result in a profit of 16.30. If that's the result I want to know this trader's next play.