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Quant Trader
Expert-Level Options for Sophisticated Traders

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

Open Trades

Open DateTickerStrategyTradeOpen PriceCurrent PriceCurrent ProbabilityDelta
4/21/2023SPYIron CondorJune 16, 2023 440/435 - 365/360$0.95 $0.95 85.41% - 89.75%-0.04
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%
3/23/20234/11/2023DIABear Call SpreadApril 21, 2023 338/443$0.62 $2.05 -28.60%
3/23/20234/19/2023IWMIron CondorMay 19, 2023 196/191 - 147/142$0.83 $0.23 13.64%
4/12/20234/21/2023DIABear Call SpreadMay 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.

COI_QT_042323_VIX.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 24, 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 ETFARKK43.32.738.9
Proshares Bitcoin ETFBITO58.83.732.6
SPDR Dow JonesDIA14.90.160
iShares MSCI Emerging MarketsEEM16.46.335.6
iShares MSCI EAFEEFA14.91.474.1
iShares MSCI Mexico ETFEWW21.80.858.7
iShares MSCI BrazilEWZ31.70.940.6
iShares China Large-CapFXI27.70.937.8
Vaneck Gold MinersGDX35.43.443.7
SPDR Gold GLD16.325.342.5
iShares High-YieldHYG10.10.154.1
iShares Russell 2000IWM22.00.453.3
SPDR Regional BankKRE39.322.645.8
Vaneck Oil ServicesOIH37.32.135.5
Invesco Nasdaq 100QQQ21.70.150
iShares Silver TrustSLV29.915.753.5
Vaneck SemiconductorSMH29.01.234.3
SPDR S&P 500 SPY 17.0159.3
iShares 20+ Treasury BondTLT16.93.439.7
United States Oil FundUSO34.811.841.1
Proshares Ultra VIX ShortUVXY122.132.925.6
CBOE Market Volatility IndexVIX96.744.332.2
Barclays S&P 500 VIX ETNVXX79.63626
SPDR BiotechXLB19.2049.5
SPDR Energy Select XLE26.21.844.7
SPDR FinancialsXLF20.04.267.7
SPDR UtilitiesXLU17.51.664.6
SPDR S&P Oil & Gas ExplorerXOP35.64.432.8
SPDR Retail XRT27.112.948.5

Stock Watch List – Trade Ideas

Ticker Symbol IVIV Rank HPMR Oversold - Overbought
AppleAAPL28.710.653.4
Bank of AmericaBAC29.09.560.9
Bristol-Myers SquibbBMY20.33.660.3
CitigroupC28.36.559.1
CaterpillarCAT33.227.943.6
ComcastCMCSA31.512.447.1
CostcoCOST20.92.466.9
Cisco SystemsCSCO28.62521.9
ChevronCVX25.40.751.7
DisneyDIS34.611.952.1
Duke EnergyDUK23.09.654.5
FedexFDX24.10.163.7
Gilead SciencesGILD26.721.682.9
General MotorsGM44.232.531.7
IntelINTC43.437.326.1
Johnson & JohnsonJNJ16.13.652.2
JP MorganJPM20.50.279.2
Coca-ColaKO15.90.186.3
Altria GroupMO19.8166.7
MerckMRK21.70.174.4
Morgan StanleyMS24.72.178.9
MicrosoftMSFT29.216.649.8
Nextera EnergyNEE26.30.364.7
NvidiaNVDA42.70.950.5
PfizerPFE26.95.136.6
PaypalPYPL43.29.544
StarbucksSBUX31.026.473
AT&TT21.71331.2
VerizonVZ2629.824.8
Walgreens Boots AllianceWBA28.49.948.9
Wells FargoWFC29.410.163.9
WalmartWMT21.512.875.9
Exxon MobilXOM27.31.559.6

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:

COI_QT_042323_SPY_bearcall.png

Put Side:

COI_QT_042323_SPY_bullput.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

May 1, 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.