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 Date | Ticker | Strategy | Trade | Open Price | Current Price | Current Probability | Delta |
| 12/7/2022 | IWM | Iron Condor | January 20, 2023 202/198 - 160/156 | $0.70 | $0.46 | 95.44% - 85.72% | 0 |
| 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% |
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.
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 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 | 55.5 | 24.1 | 39.9 |
| Proshares Bitcoin ETF | BITO | 69.8 | 6.7 | 54.8 |
| SPDR Dow Jones | DIA | 19.9 | 18.8 | 40 |
| iShares MSCI Emerging Markets | EEM | 24.0 | 25.1 | 57.5 |
| iShares MSCI EAFE | EFA | 19.9 | 20.8 | 61.5 |
| iShares MSCI Mexico ETF | EWW | 25.6 | 18.4 | 35 |
| iShares MSCI Brazil | EWZ | 43.6 | 42.5 | 40.6 |
| iShares China Large-Cap | FXI | 39.5 | 38.9 | 68.4 |
| Vaneck Gold Miners | GDX | 41.8 | 35.8 | 55.3 |
| SPDR Gold | GLD | 15.6 | 6.2 | 65.5 |
| iShares High-Yield | HYG | 13.2 | 29.3 | 54.8 |
| iShares Russell 2000 | IWM | 26.2 | 18.6 | 35.3 |
| SPDR Regional Bank | KRE | 27.3 | 13.8 | 26.4 |
| Vaneck Oil Services | OIH | 45.5 | 18.5 | 23.3 |
| Invesco Nasdaq 100 | QQQ | 28.4 | 30.9 | 43.8 |
| iShares Silver Trust | SLV | 33.6 | 30.8 | 72.7 |
| Vaneck Semiconductor | SMH | 35.5 | 25.6 | 51.9 |
| SPDR S&P 500 | SPY | 22.7 | 28.9 | 41.3 |
| iShares 20+ Treasury Bond | TLT | 23.1 | 42.7 | 56.1 |
| United States Oil Fund | USO | 46.8 | 24.1 | 22.6 |
| Proshares Ultra VIX Short | UVXY | 100.1 | 12.6 | 49.2 |
| CBOE Market Volatility Index | VIX | 86.7 | 48.5 | 58.7 |
| Barclays S&P 500 VIX ETN | VXX | 70.0 | 13.2 | 49.3 |
| SPDR Biotech | XLB | 25.5 | 45.9 | 46.1 |
| SPDR Energy Select | XLE | 36.1 | 35.1 | 17.1 |
| SPDR Financials | XLF | 24.8 | 13.1 | 32.2 |
| SPDR Utilities | XLU | 21.9 | 28.1 | 56.3 |
| SPDR S&P Oil & Gas Explorer | XOP | 48.3 | 38.7 | 15.4 |
| SPDR Retail | XRT | 36.4 | 24.9 | 38.7 |
Stock Watch List – Trade Ideas
| Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought | |
| Apple | AAPL | 34.6 | 43 | 39.3 |
| Bank of America | BAC | 35.6 | 29.3 | 14.5 |
| Bristol-Myers Squibb | BMY | 20.6 | 15.9 | 39.1 |
| Citigroup | C | 34.3 | 20.3 | 28.1 |
| Caterpillar | CAT | 31.2 | 21.7 | 36.1 |
| Comcast | CMCSA | 35.1 | 32.2 | 55.6 |
| Costco | COST | 34.7 | 17.9 | 26.8 |
| Cisco Systems | CSCO | 24.6 | 14.3 | 51 |
| Chevron | CVX | 32.8 | 32.4 | 23.2 |
| Disney | DIS | 35.5 | 22 | 42 |
| Duke Energy | DUK | 21.4 | 14.9 | 61.7 |
| Fedex | FDX | 43.1 | 53.6 | 41.9 |
| Gilead Sciences | GILD | 28.2 | 27.8 | 59.3 |
| General Motors | GM | 39.2 | 12.4 | 37.9 |
| Intel | INTC | 38.6 | 33.8 | 35.4 |
| Johnson & Johnson | JNJ | 17.6 | 24.7 | 42.2 |
| JP Morgan | JPM | 30.3 | 28.2 | 42.7 |
| Coca-Cola | KO | 18.6 | 14.5 | 52.8 |
| Altria Group | MO | 22.6 | 9 | 59.2 |
| Merck | MRK | 23.8 | 42 | 53.7 |
| Morgan Stanley | MS | 30.8 | 17 | 50.3 |
| Microsoft | MSFT | 32.1 | 27.7 | 47.6 |
| Nextera Energy | NEE | 25.5 | 29.9 | 50.9 |
| Nvidia | NVDA | 55.0 | 23.8 | 61.1 |
| Pfizer | PFE | 25.4 | 11.6 | 71.7 |
| Paypal | PYPL | 48.6 | 21 | 31.2 |
| Starbucks | SBUX | 29.1 | 11.6 | 53.9 |
| AT&T | T | 25.2 | 18.1 | 52.6 |
| Verizon | VZ | 24.3 | 29.4 | 42.4 |
| Walgreens Boots Alliance | WBA | 33.3 | 32.2 | 43.7 |
| Wells Fargo | WFC | 33.5 | 20.1 | 19.3 |
| Walmart | WMT | 20.8 | 14.7 | 24 |
| Exxon Mobil | XOM | 34.1 | 27.1 | 24.2 |
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:
Put Side:
The next Cabot Options Institute – Quant Trader issue will be published on
December 19, 2022.