Welcome!

News Feed Item

Small Cap Volatility: "Small Cap Premium," or Ratio of Implied Volatility Between U.S. Small Cap and U.S. Large Cap Stocks Back Above 60% on July 11, and Nearing Its 2014 High, According to the CBOE Russell 2000 Volatility Index and CBOE Volatility Index

SEATTLE, WA -- (Marketwired) -- 07/16/14 -- The small cap "premium," or implied volatility for the small cap U.S. equity market as reflected by closing prices for the CBOE Russell 2000 Volatility Index (SM)(RVX(SM)) relative to implied volatility for the large cap U.S. equity market as measured by the CBOE Volatility Index® (VIX®), has exceeded 50% since July 2, significantly higher than the year-to-date average, and closed at 62.9% on Friday, July 11, its highest point since June 10.

View online

At the same time, investor usage of options based on the Russell 2000® Index (RUT), as measured by average daily volume increase, has grown in 2014 relative to investor usage of options based on the S&P 500 Index (SPX). RUT options average daily volume was up 14% through June 30 relative to full year 2013, while average daily volume in S&P 500 Index-based options (SPX) was up 0.7% through June 30 relative to full year 2013. Russell 2000 Index-based futures (TF) average daily volume has increased 18% through June 30 relative to full year 2013, while average daily volume of S&P 500 Index-based futures (ES) has declined (-0.7%) through June 30 relative to full year 2013 (Source: Options Clearing Corporation, ICE, CME).

Small cap volatility has historically tended to be higher than large cap volatility. This "premium" averaged 28% over 2013 and was at just over a 38% average in 2014 to-date as of July 11. However, for April and May 2014 the premium averaged 50%, with an average RVX level of 20.00 and VIX level of 13.34. The premium hit a year-to-date high of 63% on June 10 (more than double the 2013 full year average).

"In the last week, increased overall market volatility, as measured by RVX(SM) and VIX(SM), and U.S. large cap market outperformance, as measured by the Russell 1000® Index, understandably led to increased interest in U.S. small cap equity options by traders and investors," said Russell Rhoads, CFA and instructor with The Options Institute at the Chicago Board Options Exchange. "So far this year as of July 11, the U.S. small cap Russell 2000 Index has underperformed the U.S. large cap Russell 1000® Index and RVX has been elevated to reflect investor's increased risk perception for small cap stocks."

"The fluctuation in the small cap premium we have witnessed this year as of July 11 through the relative performance of RVX & VIX helps illustrate that relative volatility levels for the U.S. large cap and small cap equity markets do not always move in lockstep," said Patrick Fay, director of index derivatives for Russell Investments. "This underscores the importance of considering small cap volatility measures rather than following a one-size-fits-all approach. Similar to 1984 when investors first welcomed the Russell 2000 Index to measure U.S. small cap equity market performance, investors and traders now welcome the CBOE Russell 2000 Volatility Index to measure U.S. small cap equity market implied volatility."

For more information on the CBOE Russell 2000 Volatility Index, go to the Russell Indexes website or CBOE Russell 2000 Volatility Index microsite.

The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 Index is a subset of the Russell 3000® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership.

Please note: Indexes are unmanaged and cannot be invested in directly. Returns represent past performance, are not a guarantee of future performance, and are not indicative of any specific investment.

Russell's publication of the Indexes or Index constituents in no way suggests or implies a representation or opinion by Russell as to the attractiveness of investing in a particular security. Inclusion of a security in an Index is not a promotion, sponsorship or endorsement of a security by Russell and Russell makes no representation, warranty or guarantee with respect to the performance of any security included in a Russell Index.

Opinions expressed by Mr. Fay and Mr. Rhoads reflect market performance as of July 11, 2014 and are subject to change at any time based on market or other conditions without notice. Past performance does not guarantee future performance.

Forecasting is inherently uncertain and may be incorrect. It is not representative of a projection of the stock market, or of any specific investment.

Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional. The information, analysis and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual entity.

Copyright © Russell Investments 2014. All rights reserved.

Russell Investment Group is a Washington, USA corporation, which operates through subsidiaries worldwide, including Russell Investments, and is a subsidiary of The Northwestern Mutual Life Insurance Company.

Image Available: http://www2.marketwire.com/mw/frame_mw?attachid=2640798

More Stories By Marketwired .

Copyright © 2009 Marketwired. All rights reserved. All the news releases provided by Marketwired are copyrighted. Any forms of copying other than an individual user's personal reference without express written permission is prohibited. Further distribution of these materials is strictly forbidden, including but not limited to, posting, emailing, faxing, archiving in a public database, redistributing via a computer network or in a printed form.

Latest Stories
Infoblox delivers Actionable Network Intelligence to enterprise, government, and service provider customers around the world. They are the industry leader in DNS, DHCP, and IP address management, the category known as DDI. We empower thousands of organizations to control and secure their networks from the core-enabling them to increase efficiency and visibility, improve customer service, and meet compliance requirements.
In his session at 21st Cloud Expo, Michael Burley, a Senior Business Development Executive in IT Services at NetApp, will describe how NetApp designed a three-year program of work to migrate 25PB of a major telco's enterprise data to a new STaaS platform, and then secured a long-term contract to manage and operate the platform. This significant program blended the best of NetApp’s solutions and services capabilities to enable this telco’s successful adoption of private cloud storage and launchi...
Join IBM November 1 at 21st Cloud Expo at the Santa Clara Convention Center in Santa Clara, CA, and learn how IBM Watson can bring cognitive services and AI to intelligent, unmanned systems. Cognitive analysis impacts today’s systems with unparalleled ability that were previously available only to manned, back-end operations. Thanks to cloud processing, IBM Watson can bring cognitive services and AI to intelligent, unmanned systems. Imagine a robot vacuum that becomes your personal assistant tha...
Transforming cloud-based data into a reportable format can be a very expensive, time-intensive and complex operation. As a SaaS platform with more than 30 million global users, Cornerstone OnDemand’s challenge was to create a scalable solution that would improve the time it took customers to access their user data. Our Real-Time Data Warehouse (RTDW) process vastly reduced data time-to-availability from 24 hours to just 10 minutes. In his session at 21st Cloud Expo, Mark Goldin, Chief Technolo...
The next XaaS is CICDaaS. Why? Because CICD saves developers a huge amount of time. CD is an especially great option for projects that require multiple and frequent contributions to be integrated. But… securing CICD best practices is an emerging, essential, yet little understood practice for DevOps teams and their Cloud Service Providers. The only way to get CICD to work in a highly secure environment takes collaboration, patience and persistence. Building CICD in the cloud requires rigorous ar...
In his Opening Keynote at 21st Cloud Expo, John Considine, General Manager of IBM Cloud Infrastructure, will lead you through the exciting evolution of the cloud. He'll look at this major disruption from the perspective of technology, business models, and what this means for enterprises of all sizes. John Considine is General Manager of Cloud Infrastructure Services at IBM. In that role he is responsible for leading IBM’s public cloud infrastructure including strategy, development, and offering ...
Cloud Expo, Inc. has announced today that Andi Mann and Aruna Ravichandran have been named Co-Chairs of @DevOpsSummit at Cloud Expo Silicon Valley which will take place Oct. 31-Nov. 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. "DevOps is at the intersection of technology and business-optimizing tools, organizations and processes to bring measurable improvements in productivity and profitability," said Aruna Ravichandran, vice president, DevOps product and solutions marketing...
Coca-Cola’s Google powered digital signage system lays the groundwork for a more valuable connection between Coke and its customers. Digital signs pair software with high-resolution displays so that a message can be changed instantly based on what the operator wants to communicate or sell. In their Day 3 Keynote at 21st Cloud Expo, Greg Chambers, Global Group Director, Digital Innovation, Coca-Cola, and Vidya Nagarajan, a Senior Product Manager at Google, will discuss how from store operations...
Gemini is Yahoo’s native and search advertising platform. To ensure the quality of a complex distributed system that spans multiple products and components and across various desktop websites and mobile app and web experiences – both Yahoo owned and operated and third-party syndication (supply), with complex interaction with more than a billion users and numerous advertisers globally (demand) – it becomes imperative to automate a set of end-to-end tests 24x7 to detect bugs and regression. In th...
The session is centered around the tracing of systems on cloud using technologies like ebpf. The goal is to talk about what this technology is all about and what purpose it serves. In his session at 21st Cloud Expo, Shashank Jain, Development Architect at SAP, will touch upon concepts of observability in the cloud and also some of the challenges we have. Generally most cloud-based monitoring tools capture details at a very granular level. To troubleshoot problems this might not be good enough.
With major technology companies and startups seriously embracing Cloud strategies, now is the perfect time to attend 21st Cloud Expo October 31 - November 2, 2017, at the Santa Clara Convention Center, CA, and June 12-14, 2018, at the Javits Center in New York City, NY, and learn what is going on, contribute to the discussions, and ensure that your enterprise is on the right path to Digital Transformation.
We all know that end users experience the Internet primarily with mobile devices. From an app development perspective, we know that successfully responding to the needs of mobile customers depends on rapid DevOps – failing fast, in short, until the right solution evolves in your customers' relationship to your business. Whether you’re decomposing an SOA monolith, or developing a new application cloud natively, it’s not a question of using microservices – not doing so will be a path to eventual b...
In the fast-paced advances and popularity in cloud technology, one of the most critical factors revolves around concerns for security of your critical data. How to assure both your company and your customers they can confidently trust and utilize your cloud environment is most often top on the list. There is a method to evaluating and providing security that exceeds conventional modes of protecting data both within the cloud as well externally on mobile and other devices. With the public failure...
Recently, REAN Cloud built a digital concierge for a North Carolina hospital that had observed that most patient call button questions were repetitive. In addition, the paper-based process used to measure patient health metrics was laborious, not in real-time and sometimes error-prone. In their session at 21st Cloud Expo, Sean Finnerty, Executive Director, Practice Lead, Health Care & Life Science at REAN Cloud, and Dr. S.P.T. Krishnan, Principal Architect at REAN Cloud, will discuss how they b...
SYS-CON Events announced today that mruby Forum will exhibit at the Japan External Trade Organization (JETRO) Pavilion at SYS-CON's 21st International Cloud Expo®, which will take place on Oct 31 – Nov 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. mruby is the lightweight implementation of the Ruby language. We introduce mruby and the mruby IoT framework that enhances development productivity. For more information, visit http://forum.mruby.org/.