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Quant Trader
Expert-Level Options for Sophisticated Traders

Cabot Options Institute – Quant Trader Issue: April 3, 2023

Weekly Commentary

We currently have two open positions, a bear call spread in DIA and an iron condor in IWM. Our deltas are currently 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. So the focus this week will be adding some positive deltas to the mix to bring the portfolio closer to a delta-neutral state.

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 $0.91 81.85% - 94.11%-0.07
3/23/2023DIABear CallApril 21, 2023 338/443$0.62 $1.50 6740.00%-0.14
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

After testing the 30 handle during the middle of March, the VIX is now approaching what has been a strong area of support, the 18 handle. We’ve seen the VIX push towards 18 for four straight months and each and every time we see the market respond with an almost immediate pullback. Now that the VIX is back down at 18 while the market is concurrently in a short-term overbought state, I think we might see a near-term reprieve over the next week or so. Of course, only time will tell.

COI_QT_040223_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 3, 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 ETFARKK48.80.166.4
Proshares Bitcoin ETFBITO60.714.663.8
SPDR Dow JonesDIA17.69.671.7
iShares MSCI Emerging MarketsEEM17.91.370.8
iShares MSCI EAFEEFA17.22.275.1
iShares MSCI Mexico ETFEWW24.43.172.9
iShares MSCI BrazilEWZ37.324.362.1
iShares China Large-CapFXI32.47.463.4
Vaneck Gold MinersGDX37.210.171.7
SPDR Gold GLD17.137.457.8
iShares High-YieldHYG11.62.877.2
iShares Russell 2000IWM24.613.160.7
SPDR Regional BankKRE51.037.938.3
Vaneck Oil ServicesOIH40.813.752.7
Invesco Nasdaq 100QQQ23.60.777.5
iShares Silver TrustSLV31.328.587.2
Vaneck SemiconductorSMH30.6371
SPDR S&P 500 SPY 18.75.574.2
iShares 20+ Treasury BondTLT20.014.260.8
United States Oil FundUSO40.427.870.2
Proshares Ultra VIX ShortUVXY116.727.935.1
CBOE Market Volatility IndexVIX84.510.331.8
Barclays S&P 500 VIX ETNVXX77.223.635.3
SPDR BiotechXLB21.86.170.8
SPDR Energy Select XLE28.712.265
SPDR FinancialsXLF25.930.854.5
SPDR UtilitiesXLU20.29.766.7
SPDR S&P Oil & Gas ExplorerXOP38.612.662.2
SPDR Retail XRT30.420.768

Stock Watch List – Trade Ideas

Ticker Symbol IVIV Rank HPMR Oversold - Overbought
AppleAAPL27.714.377.5
Bank of AmericaBAC48.038.748.8
Bristol-Myers SquibbBMY21.8674.6
CitigroupC37.032.261.3
CaterpillarCAT33.124.562.1
ComcastCMCSA31.39.275.5
CostcoCOST22.41.865.2
Cisco SystemsCSCO19.75.278.4
ChevronCVX28.210.367.4
DisneyDIS29.71.769.8
Duke EnergyDUK22.41359.8
FedexFDX28.91.779.3
Gilead SciencesGILD26.931.373
General MotorsGM42.626.365
IntelINTC47.246.483.3
Johnson & JohnsonJNJ19.616.162.6
JP MorganJPM30.734.852.9
Coca-ColaKO16.9277.3
Altria GroupMO22.51341.7
MerckMRK25.342.753.6
Morgan StanleyMS34.938.254
MicrosoftMSFT30.720.976.1
Nextera EnergyNEE29.616.269.3
NvidiaNVDA44.60.479
PfizerPFE23.45.961.7
PaypalPYPL43.41562
StarbucksSBUX26.927.676.5
AT&TT28.821.173.6
VerizonVZ25.925.375.8
Walgreens Boots AllianceWBA26.34.466.8
Wells FargoWFC41.247.439.7
WalmartWMT19.67.881.6
Exxon MobilXOM29.910.466.2

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: We are a few weeks into our IWM iron condor and so far, so good. Yes, we’ve seen the Russell 2000 rally for the last few weeks, but our short call strike (191) still has close to an 82% probability of success. Moreover, our margin of error on the call side remains at 7.1%. With 46 days left until expiration time decay will begin to truly accelerate which bodes well for our iron condor, especially if we see a short-term reprieve over the next week or so.

Call Side:

COI_QT_040223_IWM_bearcall.png

Put Side:

COI_QT_040223_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: What a difference a week makes! DIA rallied hard last week and now the 338 strike of our bear call spread sits at a 65.66% probability of success and the spread is worth $1.20. We will need to tread carefully with this one. While we never want to take a loss, sometimes it is the prudent move and if DIA continues to trend higher this week we will be forced to exit the trade. That being said, DIA is currently sitting in a short-term overbought state and historically when we see this type of setup a short-term reprieve looks likely. DIA currently sits 1.6% below the short strike of 338.

Call Side:

COI_QT_040223_DIA.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 10, 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.