Stocks moved slowly higher last week with small caps edging out large caps. The Russell 2000 (RUT) gained 0.82% while the Russell 1000 (RUI) moved up 0.35%. For the year RUI has over a 6% lead so I’m ready to award the performance win to large caps for 2017.
Most of this year the Cboe Russell 2000 Volatility Index has remained at a historically high premium relative to VIX. This relationship dropped last week, but it still much higher than the long term average in the 20% range.
Late Friday, one trader decided they have a good idea that the Russell 2000 will not finish the year over 1570. With RUT at 1542.93 (the close) there was a seller of the RUT Dec 29th 1570 Calls at 1.25 who purchased the RUT Dec 29th 1580 Calls at 0.70 taking in a net credit of 0.55.
If held through the close this coming Friday this trade works out as long as the Russell 2000 doesn’t experience a year-end rally of 1.75%.