Please ensure Javascript is enabled for purposes of website accessibility
Quant Trader
Expert-Level Options for Sophisticated Traders

Cabot Options Institute – Quant Trader Issue: December 5, 2022

We locked in another winning trade last week. Our IWM iron condor had pushed to $0.24 so we decided to lock in over 50% of the original premium sold for an 11.4% return. The trade marked the 15th out of 16 winning trades for the service since we started Quant Trader back in June. If all goes well this week, we should be able to add to our winners by locking in our December bear call spread.

As for adding new positions, nothing has changed from last week. If we see a decent pullback this week, I’ll follow our recent January expiration bear call trade with a bull put spread in January.

Current Portfolio

Open Trades

Open DateTickerStrategyTradeOpen PriceCurrent PriceCurrent ProbabilityDelta
11/10/2022SPYBear Call SpreadDecember 16, 2022 420/425$0.65 $0.77 82.49%0.08
12/1/2022SPYBear Call SpreadJanuary 20, 2023 435/440$0.67 $0.57 88.04%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%

Volatility Talk

Well, the VIX finally pushed down to the 20 level and is now at levels last seen back in the middle of August. The next few weeks should give us a good idea where the market is headed over the next few months. As it stands, we have the VIX in a short-term oversold state, sitting in an area of strong support, while simultaneously the S&P 500 is sitting at an area of strong overhead resistance, the 200-day moving average. What breaks? Will we see another push lower or can investors muster up some more bullishness to help pull the market higher as we move towards the end of the year?

COI_QT_120522_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 5, 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 ETFARKK51.822.562
Proshares Bitcoin ETFBITO73.712.256.2
SPDR Dow JonesDIA17.611.467
iShares MSCI Emerging MarketsEEM23.526.374.7
iShares MSCI EAFEEFA18.723.276.5
iShares MSCI Mexico ETFEWW25.235.747.9
iShares MSCI BrazilEWZ44.447.162.1
iShares China Large-CapFXI43.145.574
Vaneck Gold MinersGDX39.64270.9
SPDR Gold GLD14.55.572.6
iShares High-YieldHYG12.027.866.1
iShares Russell 2000IWM23.39.264.6
SPDR Regional BankKRE24.10.452.3
Vaneck Oil ServicesOIH43.213.657.1
Invesco Nasdaq 100QQQ24.92163.6
iShares Silver TrustSLV33.736.278.8
Vaneck SemiconductorSMH33.724.859.3
SPDR S&P 500 SPY 19.315.567.6
iShares 20+ Treasury BondTLT21.140.180.7
United States Oil FundUSO42.725.450.3
Proshares Ultra VIX ShortUVXY92.47.319.8
CBOE Market Volatility IndexVIX80.51137
Barclays S&P 500 VIX ETNVXX62.47.420.3
SPDR BiotechXLB23.230.573.7
SPDR Energy Select XLE32.62844.2
SPDR FinancialsXLF22.17.857.7
SPDR UtilitiesXLU20.531.663.8
SPDR S&P Oil & Gas ExplorerXOP43.829.937.1
SPDR Retail XRT34.218.863

Stock Watch List – Trade Ideas

Ticker Symbol IVIV Rank HPMR Oversold - Overbought
AppleAAPL30.13051.9
Bank of AmericaBAC27.57.234.7
Bristol-Myers SquibbBMY18.212.581
CitigroupC28.98.142.1
CaterpillarCAT31.831.862.3
ComcastCMCSA32.334.764.4
CostcoCOST22.312.128.9
Cisco SystemsCSCO28.318.875.4
ChevronCVX32.518.645.2
DisneyDIS23.423.760.3
Duke EnergyDUK41.450.961.6
FedexFDX24.729.569.1
Gilead SciencesGILD35.97.386.3
General MotorsGM35.128.351.4
IntelINTC16.210.250.1
Johnson & JohnsonJNJ24.313.872.1
JP MorganJPM16.18.752.2
Coca-ColaKO21.011.486.2
Altria GroupMO21.020.683.3
MerckMRK26.99.283
Morgan StanleyMS27.215.665
MicrosoftMSFT27.83070.8
Nextera EnergyNEE49.115.963.5
NvidiaNVDA22.78.164.1
PfizerPFE46.119.777.6
PaypalPYPL27.212.424
StarbucksSBUX21.38.487.5
AT&TT21.727.953.3
VerizonVZ28.431.545.4
Walgreens Boots AllianceWBA28.710.463.6
Wells FargoWFC18.810.136.5
WalmartWMT30.617.771.5
Exxon MobilXOM29.622.339.7

Weekly Trade Discussion: Open Positions

*Portfolio updated every Monday

Bear Call: SPY December 16, 2022, 420/425 calls
Original trade published on 11-10-2022 (click to see original alert)

Background: At the time of the trade, SPY was trading for roughly 394.10. We sold the December 16, 2022, SPY 420/425 bear call for $0.65 with an 86.45% probability of success. The expected range was 367 to 414.

Current Thoughts: SPY is currently trading for 406.91 and our bear call is worth $0.77. Our probability of success stands at 83.00% and the probability of touch is 34.03%.

With 11 days left, our SPY bear call spread continues to be in good shape. I expect to take off the position this week for a decent profit if SPY pulls back and we can take off, at least, half of the original premium sold.

COI_QT_120522_SPY_bearcall_December .png

Bear Call: SPY January 20, 2023, 435/440 calls
Original trade published on 12-01-2022 (click to see original alert)

Background: At the time of the trade, SPY was trading for roughly 406.89. We sold the January 20, 2023, SPY 435/440 bear call for $0.67 with an 85.98% probability of success. The expected range was 384 to 430.

Current Thoughts: SPY is currently trading for 406.91 and our bear call is worth $0.57. Our probability of success stands at 88.28% and the probability of touch is 23.26%.

With 46 days left, our SPY bear call spread is in great shape. If we see SPY push lower over the next week or so, and we have the ability to take off 50% of the original premium sold, expect to see a closing trade alert.

COI_QT_120522_bearcall_January.png

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

December 12, 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.