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Quant Trader
Expert-Level Options for Sophisticated Traders

Cabot Options Institute – Quant Trader Issue: December 12, 2022

We locked in two additional profits last week, both bear call spreads and both in SPY. The returns were 11.36% and 10.86%. And this is one week after locking in 11.36% in our IWM iron condor.

Our cumulative total return since introducing Quant Trader back in early June stands at 104.88%.

After exiting our two SPY bear call spreads I decided to add another IWM iron condor, this time for the January expiration cycle. Now, with 39 days left until expiration, my goal is to add at least two more trades, a bear call and bull put, for the January 20, 2023 expiration cycle.

Current Portfolio

Open Trades
Open DateTickerStrategyTradeOpen PriceCurrent PriceCurrent ProbabilityDelta
12/7/2022IWMIron CondorJanuary 20, 2023 202/198 - 160/156$0.70 $0.46 95.44% - 85.72%0
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%

Volatility Talk

After the VIX hit 20 last week, the volatility index bounced off what has been strong support to close the week just under 23.

As I stated last week, the next few weeks should give us a good idea where the market is headed over the next few months. VIX is no longer in an oversold state and all of the major indices are back below their respective 200-day moving averages.

My guess, and it’s only a guess, is that the VIX continues to trade in the range of 20 to 35 for the foreseeable future unless we see something significant occur. As a result, nothing changes, we simply continue to take advantage of the historically heightened implied volatility by selling more premium.

COI_QT_121122_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 December 12, 2022.

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 ETFARKK55.524.139.9
Proshares Bitcoin ETFBITO69.86.754.8
SPDR Dow JonesDIA19.918.840
iShares MSCI Emerging MarketsEEM24.025.157.5
iShares MSCI EAFEEFA19.920.861.5
iShares MSCI Mexico ETFEWW25.618.435
iShares MSCI BrazilEWZ43.642.540.6
iShares China Large-CapFXI39.538.968.4
Vaneck Gold MinersGDX41.835.855.3
SPDR Gold GLD15.66.265.5
iShares High-YieldHYG13.229.354.8
iShares Russell 2000IWM26.218.635.3
SPDR Regional BankKRE27.313.826.4
Vaneck Oil ServicesOIH45.518.523.3
Invesco Nasdaq 100QQQ28.430.943.8
iShares Silver TrustSLV33.630.872.7
Vaneck SemiconductorSMH35.525.651.9
SPDR S&P 500 SPY 22.728.941.3
iShares 20+ Treasury BondTLT23.142.756.1
United States Oil FundUSO46.824.122.6
Proshares Ultra VIX ShortUVXY100.112.649.2
CBOE Market Volatility IndexVIX86.748.558.7
Barclays S&P 500 VIX ETNVXX70.013.249.3
SPDR BiotechXLB25.545.946.1
SPDR Energy Select XLE36.135.117.1
SPDR FinancialsXLF24.813.132.2
SPDR UtilitiesXLU21.928.156.3
SPDR S&P Oil & Gas ExplorerXOP48.338.715.4
SPDR Retail XRT36.424.938.7

Stock Watch List – Trade Ideas

Ticker Symbol IVIV Rank HPMR Oversold - Overbought
AppleAAPL34.64339.3
Bank of AmericaBAC35.629.314.5
Bristol-Myers SquibbBMY20.615.939.1
CitigroupC34.320.328.1
CaterpillarCAT31.221.736.1
ComcastCMCSA35.132.255.6
CostcoCOST34.717.926.8
Cisco SystemsCSCO24.614.351
ChevronCVX32.832.423.2
DisneyDIS35.52242
Duke EnergyDUK21.414.961.7
FedexFDX43.153.641.9
Gilead SciencesGILD28.227.859.3
General MotorsGM39.212.437.9
IntelINTC38.633.835.4
Johnson & JohnsonJNJ17.624.742.2
JP MorganJPM30.328.242.7
Coca-ColaKO18.614.552.8
Altria GroupMO22.6959.2
MerckMRK23.84253.7
Morgan StanleyMS30.81750.3
MicrosoftMSFT32.127.747.6
Nextera EnergyNEE25.529.950.9
NvidiaNVDA55.023.861.1
PfizerPFE25.411.671.7
PaypalPYPL48.62131.2
StarbucksSBUX29.111.653.9
AT&TT25.218.152.6
VerizonVZ24.329.442.4
Walgreens Boots AllianceWBA33.332.243.7
Wells FargoWFC33.520.119.3
WalmartWMT20.814.724
Exxon MobilXOM34.127.124.2

Weekly Trade Discussion: Open Positions

*Portfolio updated every Monday

Iron Condor: IWM January 20, 2023, 202/198 calls – 160/156 puts
Original trade published on 12-7-2022 (click to see original alert)

Background: At the time of the trade, IWM was trading for roughly 180.49. We sold the January 20, 2023, IWM 202/198 – 160/156 iron condor for $0.70. The expected range was 168 to 193.

Current Thoughts: IWM is currently trading for 178.62 and our bear call is worth $0.62. Our probability of success stands at 91.94% on the call side and 85.92% on the put side. So far, so good. Now we wait while time decay works its magic. As always, if we have an opportunity to take off over 50% of the original premium sold we will go ahead and do so. But with 39 days left until expiration, realistically we still have at least two weeks before we can start thinking about taking any sort of profit off the table.

Call Side:

COI_QT_121122_IWM_bearcall.png

Put Side:

COI_QT_121122_bullput.png

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

December 19, 2022.

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.