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
Open Trades | |||||||
Open Date | Ticker | Strategy | Trade | Open Price | Current Price | Current Probability | Delta |
4/21/2023 | SPY | Iron Condor | June 16, 2023 440/435 - 365/360 | $0.95 | $0.95 | 85.41% - 89.75% | -0.04 |
Open Date | Closed Date | Ticker | Strategy | Trade | Open Price | Closing Price | Return |
6/2/2022 | 6/13/2022 | SPY | Bear Call Spread | July 15, 2022 440/445 | $0.70 | $0.05 | 14.94% |
6/8/2022 | 6/17/2022 | XOP | Bear Call Spread | July 15, 2022 190/195 | $0.70 | $0.04 | 15.21% |
6/22/2022 | 7/13/2022 | SPY | Bear Call Spread | July 29, 2022 405/410 | $0.75 | $0.35 | 8.70% |
6/30/2022 | 7/25/2022 | IWM | Iron Condor | August 19, 2022 195/200 - 145/140 | $0.70 | $0.34 | 7.76% |
7/8/2022 | 7/28/2022 | GLD | Bull Put Spread | August 19, 2022 155/150 | $0.60 | $0.16 | 9.65% |
7/14/2022 | 8/11/2022 | SPY | Iron Condor | August 19, 2022 417/412 - 335/330 | $0.70 | $4.10 | -68.00% |
8/1/2022 | 8/29/2022 | SPY | Bear Call Spread | September 16, 2022 439/444 | $0.70 | $0.07 | 14.42% |
8/11/2022 | 8/29/2022 | DIA | Bear Call Spread | September 23, 2022 350/325 | $0.75 | $0.08 | 15.47% |
8/11/2022 | 9/8/2022 | IWM | Iron Condor | September 23, 2022 220/215 - 173/168 | $0.77 | $0.57 | 4.17% |
9/7/2022 | 9/9/2022 | QQQ | Bull Put Spread | October 21, 2022 260/255 | $0.62 | $0.30 | 6.84% |
9/9/2022 | 9/15/2022 | SPY | Bear Call Spread | October 21, 2022 430/435 | $0.75 | $0.25 | 11.11% |
9/13/2022 | 10/17/2022 | IWM | Iron Condor | October 21, 2022 208/203 - 163/158 | $0.77 | $0.30 | 10.40% |
10/3/2022 | 10/25/2022 | SPY | Bull Put Spread | November 18, 2022 325/320 | $0.54 | $0.09 | 9.89% |
10/4/2022 | 11/2/2022 | IWM | Iron Condor | November 18, 2022 198/203 - 143/138 | $0.64 | $0.32 | 6.84% |
10/6/2022 | 11/2/2022 | SPY | Bear Call Spread | November 18, 2022 412/416 | $0.43 | $0.28 | 3.90% |
11/16/2022 | 11/28/2022 | IWM | Iron Condor | December 16, 2022 205/200 - 162/157 | $0.75 | $0.24 | 11.36% |
11/10/2022 | 12/6/2022 | SPY | Bear Call Spread | December 16, 2022 420/425 | $0.65 | $0.14 | 11.36% |
12/1/2022 | 12/6/2022 | SPY | Bear Call Spread | January 20, 2023 435/440 | $0.67 | $0.18 | 10.86% |
12/13/2022 | 12/15/2022 | SPY | Bear Call Spread | January 20, 2023 430/435 | $0.54 | $0.17 | 7.99% |
12/7/2023 | 1/6/2023 | IWM | Iron Condor | January 20, 2023 202/198 - 160/156 | $0.70 | $0.06 | 19.00% |
1/4/2023 | 2/1/2023 | IWM | Iron Condor | February 17, 2023 200/195 - 154/149 | $0.65 | $2.00 | -27.00% |
1/6/2023 | 2/2/2023 | SPY | Bear Call Spread | February 17, 2023 415/420 | $0.60 | $2.50 | -38.00% |
2/2/2023 | 2/15/2023 | SPY | Bear Call Spread | March 17, 2023 440/445 | $0.63 | $0.15 | 10.62% |
2/10/2023 | 2/22/2023 | DIA | Bear Call Spread | March 31, 2023 355/360 | $0.70 | $0.17 | 11.86% |
2/2/2023 | 3/1/2023 | IWM | Iron Condor | March 17, 2023 175/180 - 215/220 | $0.72 | $0.51 | 4.38% |
3/6/2023 | 3/13/2023 | DIA | Bear Call Spread | April 21, 2023 350/355 | $0.85 | $0.17 | 15.74% |
2/23/2023 | 3/28/2023 | SPY | Iron Condor | April 21, 2023 435/430 - 350/345 | $0.80 | $0.15 | 14.94% |
3/23/2023 | 4/11/2023 | DIA | Bear Call Spread | April 21, 2023 338/443 | $0.62 | $2.05 | -28.60% |
3/23/2023 | 4/19/2023 | IWM | Iron Condor | May 19, 2023 196/191 - 147/142 | $0.83 | $0.23 | 13.64% |
4/12/2023 | 4/21/2023 | DIA | Bear Call Spread | May 19, 2023 350/355 | $0.82 | $0.44 | 8.23% |
117.68% |
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.
Very Overbought | greater than or equal to 80.1 |
Overbought | 60.1 to 80.0 |
Neutral | 40.1 to 60 |
Oversold | 20.1 to 40.0 |
Very Oversold | less 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 | IV | IV Rank | HPMR Oversold - Overbought | |
ARK Innovation ETF | ARKK | 43.3 | 2.7 | 38.9 |
Proshares Bitcoin ETF | BITO | 58.8 | 3.7 | 32.6 |
SPDR Dow Jones | DIA | 14.9 | 0.1 | 60 |
iShares MSCI Emerging Markets | EEM | 16.4 | 6.3 | 35.6 |
iShares MSCI EAFE | EFA | 14.9 | 1.4 | 74.1 |
iShares MSCI Mexico ETF | EWW | 21.8 | 0.8 | 58.7 |
iShares MSCI Brazil | EWZ | 31.7 | 0.9 | 40.6 |
iShares China Large-Cap | FXI | 27.7 | 0.9 | 37.8 |
Vaneck Gold Miners | GDX | 35.4 | 3.4 | 43.7 |
SPDR Gold | GLD | 16.3 | 25.3 | 42.5 |
iShares High-Yield | HYG | 10.1 | 0.1 | 54.1 |
iShares Russell 2000 | IWM | 22.0 | 0.4 | 53.3 |
SPDR Regional Bank | KRE | 39.3 | 22.6 | 45.8 |
Vaneck Oil Services | OIH | 37.3 | 2.1 | 35.5 |
Invesco Nasdaq 100 | QQQ | 21.7 | 0.1 | 50 |
iShares Silver Trust | SLV | 29.9 | 15.7 | 53.5 |
Vaneck Semiconductor | SMH | 29.0 | 1.2 | 34.3 |
SPDR S&P 500 | SPY | 17.0 | 1 | 59.3 |
iShares 20+ Treasury Bond | TLT | 16.9 | 3.4 | 39.7 |
United States Oil Fund | USO | 34.8 | 11.8 | 41.1 |
Proshares Ultra VIX Short | UVXY | 122.1 | 32.9 | 25.6 |
CBOE Market Volatility Index | VIX | 96.7 | 44.3 | 32.2 |
Barclays S&P 500 VIX ETN | VXX | 79.6 | 36 | 26 |
SPDR Biotech | XLB | 19.2 | 0 | 49.5 |
SPDR Energy Select | XLE | 26.2 | 1.8 | 44.7 |
SPDR Financials | XLF | 20.0 | 4.2 | 67.7 |
SPDR Utilities | XLU | 17.5 | 1.6 | 64.6 |
SPDR S&P Oil & Gas Explorer | XOP | 35.6 | 4.4 | 32.8 |
SPDR Retail | XRT | 27.1 | 12.9 | 48.5 |
Stock Watch List – Trade Ideas
Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought | |
Apple | AAPL | 28.7 | 10.6 | 53.4 |
Bank of America | BAC | 29.0 | 9.5 | 60.9 |
Bristol-Myers Squibb | BMY | 20.3 | 3.6 | 60.3 |
Citigroup | C | 28.3 | 6.5 | 59.1 |
Caterpillar | CAT | 33.2 | 27.9 | 43.6 |
Comcast | CMCSA | 31.5 | 12.4 | 47.1 |
Costco | COST | 20.9 | 2.4 | 66.9 |
Cisco Systems | CSCO | 28.6 | 25 | 21.9 |
Chevron | CVX | 25.4 | 0.7 | 51.7 |
Disney | DIS | 34.6 | 11.9 | 52.1 |
Duke Energy | DUK | 23.0 | 9.6 | 54.5 |
Fedex | FDX | 24.1 | 0.1 | 63.7 |
Gilead Sciences | GILD | 26.7 | 21.6 | 82.9 |
General Motors | GM | 44.2 | 32.5 | 31.7 |
Intel | INTC | 43.4 | 37.3 | 26.1 |
Johnson & Johnson | JNJ | 16.1 | 3.6 | 52.2 |
JP Morgan | JPM | 20.5 | 0.2 | 79.2 |
Coca-Cola | KO | 15.9 | 0.1 | 86.3 |
Altria Group | MO | 19.8 | 1 | 66.7 |
Merck | MRK | 21.7 | 0.1 | 74.4 |
Morgan Stanley | MS | 24.7 | 2.1 | 78.9 |
Microsoft | MSFT | 29.2 | 16.6 | 49.8 |
Nextera Energy | NEE | 26.3 | 0.3 | 64.7 |
Nvidia | NVDA | 42.7 | 0.9 | 50.5 |
Pfizer | PFE | 26.9 | 5.1 | 36.6 |
Paypal | PYPL | 43.2 | 9.5 | 44 |
Starbucks | SBUX | 31.0 | 26.4 | 73 |
AT&T | T | 21.7 | 13 | 31.2 |
Verizon | VZ | 26 | 29.8 | 24.8 |
Walgreens Boots Alliance | WBA | 28.4 | 9.9 | 48.9 |
Wells Fargo | WFC | 29.4 | 10.1 | 63.9 |
Walmart | WMT | 21.5 | 12.8 | 75.9 |
Exxon Mobil | XOM | 27.3 | 1.5 | 59.6 |
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.