Cabot Options Institute – Quant Trader Issue: April 24, 2023

Weekly Commentary

We locked in two winning trades this past week, bringing our overall win ratio to 86.7% since introducing the service back in late May of last year.

On Wednesday I decided to go ahead and lock in a 13.64% return in our May 19, 2023, IWM iron condor. We were able to lock in over 75% of the original premium sold and with roughly 30 days left until expiration, it just didn’t make sense to hold on to the trade and the associated risk when we could simply lock in a profit and move on to the next opportunity. We were in the trade for 26 days.

By the time Friday rolled around, the premium in our May 19, 2023, DIA bear call spread was declining. Certainly, a great sign, especially since DIA continued to trade in a tight range around the 338 area. Time decay was working its magic as the IV in DIA continued to decline. So, like our IWM iron condor, I decided to lock in some profits. With just under 30 days left until expiration, we were able to lock in 8.23%. We were in the trade for 9 days.

I also added a new position on Friday, a June 16, 2023, SPY iron condor. The position, while range-bound in its foundation, leans slightly to the bearish side of things as it’s short a few deltas. As I stated on our call last week, I will be adding at least one trade early this week with the intent of adding a third trade to the mix during the middle to latter part of the week, although Mr. Market will dictate when we place the trade. We have 53 days until the June expiration and, at minimum, I want to have three trades in the mix with the intent of taking off all three well before the June 16, 2023, expiry.

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

Current Portfolio

Volatility Talk

The VIX continues to be mired in a short-term oversold state as it floats in the 16 to 17 range after breaking what had been strong support at the 18 level.

Since the beginning of 2022, the VIX has bounced, almost predictably, between 18 and 34. But the seesaw movement has finally come to an end. Now the question is, will we see a continued push lower or experience a quick bounce back to the middle of the previous range, if not higher?

If we consider the extreme oversold state of the VIX coupled with IV ranks in the majority of the highly liquid stocks we follow at near-term lows, well, the short-term leaning is certainly bearish. Additionally, there are some seasonal winds blowing in with the “Sell in May” mantra soon to be in play which could potentially add to the short-term bearishness.

My intent is to continue to keep my overall deltas leaning slightly bearish, but also give myself plenty of room just in case we see a continued trend to the upside in the overall market.

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 24, 2023.

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

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

Stock Watch List – Trade Ideas

Weekly Trade Discussion: Open Positions

*Portfolio updated every Monday

Iron Condor: SPY June 16, 2023, 440/435 calls – 365/360 puts
Original trade published on 4-21-2023 (click to see original alert)

Background: At the time of the trade, SPY was trading for 412.50. We sold the June 16, 2023, SPY 440/435 – 365/360 iron condor for $0.95. The expected range or move was 393 to 432.

Current Thoughts: We just added the position last Friday so there really isn’t much to discuss at the moment. We brought in a bit more premium than usual, so if we see any notable decay as we near the 30-day mark in the trade I will most likely get out of the trade and move on. But we have a few weeks until that point, and as we all know, the market has its own ideas as to what it has planned.

Even so, we entered the trade with respectable probabilities of success on both sides of the trade which should give us a nice cushion in case we see a near-term trend form.

Call Side:

Put Side:

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

May 1, 2023.