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Quant Trader
Expert-Level Options for Sophisticated Traders

Cabot Options Institute – Quant Trader Issue: April 10, 2023

Weekly Commentary

Nothing has changed from last week. We currently have two open positions, a bear call spread in DIA and an iron condor in IWM. Our deltas continue to be skewed towards the bearish side of things, so we will need to balance out our deltas by adding a bull put spread or some other bullish leaning strategy…potentially a bullish leaning iron condor? So, the focus this week, like last week, will be adding some positive deltas to the mix to bring the portfolio closer to a delta-neutral state. My focus will be on expiration cycles ranging from 35 to 60 days until expiration.

If you have any questions, please do not hesitate to email me at andy@cabotwealth.com.

Current Portfolio

Open Trades

Open DateTickerStrategyTradeOpen PriceCurrent PriceCurrent ProbabilityDelta
3/23/2023IWMIron CondorMay 19, 2023 196/191 - 147/142$0.83 $0.45 91.69% - 93.47%-0.03
3/23/2023DIABear CallApril 21, 2023 338/443$0.62 $1.51 62.14%-0.22
Open DateClosed DateTickerStrategy TradeOpen PriceClosing PriceReturn
6/2/20226/13/2022SPYBear Call SpreadJuly 15, 2022 440/445 $0.70 $0.05 14.94%
6/8/20226/17/2022XOPBear Call SpreadJuly 15, 2022 190/195$0.70 $0.04 15.21%
6/22/20227/13/2022SPYBear Call SpreadJuly 29, 2022 405/410$0.75 $0.35 8.70%
6/30/20227/25/2022IWMIron CondorAugust 19, 2022 195/200 - 145/140$0.70 $0.34 7.76%
7/8/20227/28/2022GLDBull Put SpreadAugust 19, 2022 155/150 $0.60 $0.16 9.65%
7/14/20228/11/2022SPYIron CondorAugust 19, 2022 417/412 - 335/330$0.70 $4.10 -68.00%
8/1/20228/29/2022SPYBear Call SpreadSeptember 16, 2022 439/444$0.70 $0.07 14.42%
8/11/20228/29/2022DIABear Call SpreadSeptember 23, 2022 350/325$0.75 $0.08 15.47%
8/11/20229/8/2022IWMIron CondorSeptember 23, 2022 220/215 - 173/168$0.77 $0.57 4.17%
9/7/20229/9/2022QQQBull Put SpreadOctober 21, 2022 260/255$0.62 $0.30 6.84%
9/9/20229/15/2022SPYBear Call SpreadOctober 21, 2022 430/435$0.75 $0.25 11.11%
9/13/202210/17/2022IWMIron CondorOctober 21, 2022 208/203 - 163/158$0.77 $0.30 10.40%
10/3/202210/25/2022SPYBull Put SpreadNovember 18, 2022 325/320 $0.54 $0.09 9.89%
10/4/202211/2/2022IWMIron CondorNovember 18, 2022 198/203 - 143/138$0.64 $0.32 6.84%
10/6/202211/2/2022SPYBear Call SpreadNovember 18, 2022 412/416$0.43 $0.28 3.90%
11/16/202211/28/2022IWMIron CondorDecember 16, 2022 205/200 - 162/157$0.75 $0.24 11.36%
11/10/202212/6/2022SPYBear Call SpreadDecember 16, 2022 420/425$0.65 $0.14 11.36%
12/1/202212/6/2022SPYBear Call SpreadJanuary 20, 2023 435/440$0.67 $0.18 10.86%
12/13/202212/15/2022SPYBear Call SpreadJanuary 20, 2023 430/435$0.54 $0.17 7.99%
12/7/20231/6/2023IWMIron CondorJanuary 20, 2023 202/198 - 160/156$0.70 $0.06 19.00%
1/4/20232/1/2023IWMIron CondorFebruary 17, 2023 200/195 - 154/149$0.65 $2.00 -27.00%
1/6/20232/2/2023SPYBear Call SpreadFebruary 17, 2023 415/420 $0.60 $2.50 -38.00%
2/2/20232/15/2023SPYBear Call SpreadMarch 17, 2023 440/445$0.63 $0.15 10.62%
2/10/20232/22/2023DIABear Call SpreadMarch 31, 2023 355/360$0.70 $0.17 11.86%
2/2/20233/1/2023IWMIron CondorMarch 17, 2023 175/180 - 215/220$0.72 $0.51 4.38%
3/6/20233/13/2023DIABear Call SpreadApril 21, 2023 350/355$0.85 $0.17 15.74%
2/23/20233/28/2023SPYIron CondorApril 21, 2023 435/430 - 350/345$0.80 $0.15 14.94%

Volatility Talk

The investor’s fear gauge is once again back down testing what has been an incredibly strong level of support, the 18 handle.

In the recent past, as seen in the chart below, shortly after the VIX hits 18 we quickly see a bounce. If you couple the action in the VIX with the price action of most of the major indices this makes perfect sense as several of the major indices have recently pushed into a short-term overbought state. When the VIX hits support coupled with a short-term overbought state in the major indices it is typical to see a short-term reprieve via either a pullback or a short period of consolidation.

Screenshot 2023-04-10 at 8.21.12 AM.png

Weekly High-Probability Mean Reversion Indicator

Below is my watch list of ETFs and stocks with the most liquid options headed into the week of April 10, 2023.

Here are the various levels I use to determine if an ETF is in an oversold or overbought state.

Very Overboughtgreater than or equal to 80.1
Overbought60.1 to 80.0
Neutral40.1 to 60
Oversold20.1 to 40.0
Very Oversoldless than or equal to 20.0

Each week I also include the current implied volatility (IV) and IV Rank. I look for an IV rank above 40, preferably higher.

ETF Watch List – Trade Ideas

Ticker Symbol IVIV Rank HPMR Oversold - Overbought
ARK Innovation ETFARKK48.71.248.9
Proshares Bitcoin ETFBITO63.97.349.5
SPDR Dow JonesDIA16.84.570.2
iShares MSCI Emerging MarketsEEM17.24.162.3
iShares MSCI EAFEEFA16.52.970.7
iShares MSCI Mexico ETFEWW25.16.954.4
iShares MSCI BrazilEWZ34.59.653.6
iShares China Large-CapFXI30.00.156.5
Vaneck Gold MinersGDX38.113.984.8
SPDR Gold GLD18.447.762.8
iShares High-YieldHYG11.82.358.2
iShares Russell 2000IWM24.713.942.8
SPDR Regional BankKRE47.936.335.9
Vaneck Oil ServicesOIH43.018.948.9
Invesco Nasdaq 100QQQ24.10.864
iShares Silver TrustSLV33.843.186.3
Vaneck SemiconductorSMH32.35.443.7
SPDR S&P 500 SPY 18.41.367.6
iShares 20+ Treasury BondTLT20.815.373.7
United States Oil FundUSO35.913.481
Proshares Ultra VIX ShortUVXY104.116.131.9
CBOE Market Volatility IndexVIX84.123.232.3
Barclays S&P 500 VIX ETNVXX69.715.932.3
SPDR BiotechXLB22.115.255.4
SPDR Energy Select XLE30.014.861.1
SPDR FinancialsXLF26.131.850.8
SPDR UtilitiesXLU20.37.877.5
SPDR S&P Oil & Gas ExplorerXOP39.814.658.3
SPDR Retail XRT31.419.843.4

Stock Watch List – Trade Ideas

Ticker Symbol IVIV Rank HPMR Oversold - Overbought
AppleAAPL30.118.266.7
Bank of AmericaBAC44.051.240.3
Bristol-Myers SquibbBMY21.43.576.2
CitigroupC38.335.949.4
CaterpillarCAT37.750.827.3
ComcastCMCSA31.513.163.1
CostcoCOST23.41.337.1
Cisco SystemsCSCO21.23.553.2
ChevronCVX27.88.365.2
DisneyDIS30.53.267.4
Duke EnergyDUK23.517.572.5
FedexFDX28.01.777.8
Gilead SciencesGILD32.436.466.2
General MotorsGM45.939.339.1
IntelINTC46.748.578.2
Johnson & JohnsonJNJ19.111.284.6
JP MorganJPM32.238.740.1
Coca-ColaKO16.51.680.6
Altria GroupMO22.214.139.8
MerckMRK24.837.178.7
Morgan StanleyMS36.846.737.1
MicrosoftMSFT31.627.273.4
Nextera EnergyNEE28.912.978.4
NvidiaNVDA45.30.456
PfizerPFE26.110.366.4
PaypalPYPL44.513.353.6
StarbucksSBUX33.33670.8
AT&TT28.223.670.3
VerizonVZ2523.766.1
Walgreens Boots AllianceWBA26.33.771.2
Wells FargoWFC41.346.250.8
WalmartWMT18.30.180.1
Exxon MobilXOM29.4867.1

Weekly Trade Discussion: Open Positions

*Portfolio updated every Monday

Iron Condor: IWM May 19, 2023, 196/191 calls – 147/142 puts

Original trade published on 3-23-2023 (click to see original alert)

Background: At the time of the trade, IWM was trading for 172.95. We sold the May 19, 2023, IWM 196/191 – 147/142 iron condor for $0.83. The expected range or move was 159 to 187.

Current Thoughts: Our position is currently in great shape. As you can see in the images below, our probabilities of success are over 92% on both sides and the price of our iron condor sits at $0.45. So, we could take a decent profit off the table and I expect to do so if we see the price of our iron condor dip slightly more, preferably around $0.35.

Call Side:

COI_QT_041023_IWM_bearcall.png

Put Side:

COI_QT_041023_IWM_bullput.png

Bear Call: DIA April 21, 2023, 338/343 calls

Original trade published on 3-23-2023 (click to see original alert)

Background: At the time of the trade, DIA was trading for 323.20. We sold the April 21, 2023, DIA 338/343 bear call spread for $0.62. The expected range or move was 310 to 336.

Current Thoughts: We only have two weeks left in our DIA bear call. My preference, as many of you already know, would be to get out of the trade completely. Gamma risk becomes a major factor as we get closer and closer to expiration so the goal this week is to take off our DIA, if possible. Of course, Mr. Market will dictate our actions. Hopefully we will have an opportunity to take a profit off the table, but if we have to take off our trade for a loss we will do so. Remember, in the world of high-probability trading, risk management is a key factor in long-term success, so it is imperative that we stick to the mechanics and not allow emotions to bleed into our trading decisions.

Call Side:

COI_QT_041023_DIA_bearcall.png

As always, if you have any questions, please feel free to email me at andy@cabotwealth.com.


The next Cabot Options Institute – Quant Trader issue will be published on

April 17, 2023.

Andy Crowder is a professional options trader, researcher and Chief Analyst of Cabot Options Institute. Formerly with Oppenheimer & Co. in New York, Andy has leveraged his investment experience to develop his statistically based options trading strategy which applies probability theory to option valuations in order to execute risk-controlled trades. This proprietary strategy has been refined through two decades of research and real-world experience and has been featured in the Wall Street Journal, Seeking Alpha, and numerous other financial publications. Andy has helped thousands of option traders learn and implement his meticulous rules-driven options trading strategies through highly attended conferences, one-on-one coaching, webinars, and his work as a financial columnist. He currently resides in Bolton Valley, Vermont and when he’s not trading, teaching and writing about options, he enjoys spending time with his wife and two daughters, backcountry skiing, biking, running and enjoying all things outdoors.