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Quant Trader
Expert-Level Options for Sophisticated Traders

Cabot Options Institute – Quant Trader Issue: December 27, 2022

I’m going to keep it short today as we enter the first of two holiday-shortened weeks. The focus, as always, continues to be adding a few positions to balance out the mix of options strategies and our deltas. As it stands, we only have an iron condor heading into the January expiration cycle, but if all goes well, we should have an opportunity to add one or two January trades, and with 52 days left until February expiration, I will also be looking to add positions there as well.

But as we enter the final week of the year, let us not forget how wonderful this year was for our Quant Trader service. We look to end the year with 19 out of 20 winning trades for a 125% cumulative return. Given the market environment this year, I couldn’t be more pleased with the results in my first year here at Cabot Wealth. And here’s hoping 2023 is even better!

I hope all of you have a wonderful and safe New Year!

Current Portfolio

Open Trades
Open DateTickerStrategyTradeOpen PriceCurrent PriceCurrent ProbabilityDelta
12/7/2022IWMIron CondorJanuary 20, 2023 202/198 - 160/156$0.70 $0.32 97.78% - 88.29%3
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%

Volatility Talk

Nothing new here. For weeks now the volatility gauge has been floating in a fairly tight trading range between roughly 20 to 25. Until it breaks that range, with conviction, I expect we should continue to see some decent premium opportunities, especially if the VIX trades towards the higher side of the range and beyond.

COI_QT_122722_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 27, 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 ETFARKK54.422.722.9
Proshares Bitcoin ETFBITO67.61645.9
SPDR Dow JonesDIA18.411.145.2
iShares MSCI Emerging MarketsEEM22.322.337.5
iShares MSCI EAFEEFA19.120.746.3
iShares MSCI Mexico ETFEWW22.15.161.1
iShares MSCI BrazilEWZ36.428.658.9
iShares China Large-CapFXI34.919.947.8
Vaneck Gold MinersGDX38.331.751.5
SPDR Gold GLD14.82.452.5
iShares High-YieldHYG11.52344.2
iShares Russell 2000IWM24.610.939.9
SPDR Regional BankKRE25.21142
Vaneck Oil ServicesOIH43.614.560.4
Invesco Nasdaq 100QQQ26.925.930.6
iShares Silver TrustSLV32.431.158.5
Vaneck SemiconductorSMH35.625.130.3
SPDR S&P 500 SPY 21.020.339.3
iShares 20+ Treasury BondTLT23.044.628.4
United States Oil FundUSO41.21966.5
Proshares Ultra VIX ShortUVXY95.11042.2
CBOE Market Volatility IndexVIX78.99.343.4
Barclays S&P 500 VIX ETNVXX66.210.542.7
SPDR BiotechXLB24.135.540.3
SPDR Energy Select XLE32.322.456.5
SPDR FinancialsXLF23.110.543
SPDR UtilitiesXLU20.836.252.7
SPDR S&P Oil & Gas ExplorerXOP41.62151.9
SPDR Retail XRT33.815.637.8

Stock Watch List – Trade Ideas

Ticker Symbol IVIV Rank HPMR Oversold - Overbought
AppleAAPL37.053.629.4
Bank of AmericaBAC34.224.840.5
Bristol-Myers SquibbBMY22.929.323.7
CitigroupC35.725.540.8
CaterpillarCAT35.532.762.7
ComcastCMCSA25.810.652.9
CostcoCOST24.512.632.9
Cisco SystemsCSCO29.72039.9
ChevronCVX36.822.961.2
DisneyDIS19.512.937.3
Duke EnergyDUK34.229.667.5
FedexFDX23.913.457.8
Gilead SciencesGILD41.720.431.8
General MotorsGM41.936.422.8
IntelINTC18.420.125.8
Johnson & JohnsonJNJ30.428.153.7
JP MorganJPM17.510.346.9
Coca-ColaKO21.610.859.5
Altria GroupMO20.89.248.7
MerckMRK33.627.869.1
Morgan StanleyMS33.131.938.6
MicrosoftMSFT26.327.936.2
Nextera EnergyNEE57.228.746.8
NvidiaNVDA26.213.930.8
PfizerPFE47.317.653.3
PaypalPYPL29.312.827
StarbucksSBUX27.028.438.3
AT&TT26.334.641.1
VerizonVZ35.841.265.6
Walgreens Boots AllianceWBA35.225.131.1
Wells FargoWFC2010.430.8
WalmartWMT29.14.737.5
Exxon MobilXOM30.817.859.7

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 174.39 and our iron condor is worth $0.32. Our probability of success stands at 97.86% on the call side and 87.91% on the put side. So far, so good. As I stated over the last few weeks, now we wait while time decay works its magic. As it stands, we have the ability to take off our iron condor for $0.32 and lock in over 50% of the original premium sold. But given the high probabilities at the moment I intend to hold on a bit longer.

Call Side:

COI_QT_122722_bearcall.png

Put Side:

COI_QT_122722_IWM_bullput.png


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

January 3, 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.