The Russell 2000 (RUT) took a rest for dominating the Russell 1000 (RUI) last week. Neither index RUT dropped 2.8% while RUI was down about 1.1%. Since the election the Russell 2000 had gone a bit parabolic, something we don’t often see from broad based indexes. As of Friday RUT is up 15.7% while RUI is up 7.5% for 2016.
The chart below breaks down performance for both RUI and RUT since the election. Despite the tough week RUT is up 10.0% since November 8th while RUI has gained 2.7%.
The ratio of the CBOE Russell 2000 Volatility Index (RVX) to VIX dropped last week. This is typical when the equity markets come under pressure. However, VIX rose and RVX actually dropped a bit last week. A pending known – unknown, the Italian referendum this weekend, may have given VIX a slight bump to the upside as pending geo political and macroeconomic events are apt to do.
On Friday there was one of those way out of the money credit spreads executed in the RUT pit. As the day came to a close someone sold 260 of the RUT Dec 16th 1190 Puts for 0.85 who then bought 260 RUT Dec 16th 1165 Puts for a 0.64 and a net credit of 0.21. The reward on this trade is 0.21 while the risk will be 24.79, but a lot has to go wrong for this trade to lose 24.79. Specifically a two week drop of over 11%.