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Quant Trader
Expert-Level Options for Sophisticated Traders

Cabot Options Institute – Quant Trader Issue: February 13, 2023

Weekly Earnings Commentary

We currently have three open positions due to expire in March, all of which are leaning towards the bearish side of things. As a result, we need to add some positive deltas to the mix, which I intend to do this week. Other than that there really isn’t much to discuss at the moment since we are relatively early in the March expiration cycle.

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
2/2/2023SPYBear CallMarch 17, 2023 440/445$0.63 $0.26 94.05%-0.03
2/2/2023IWMIron CondorMarch 17, 2023 175/180 - 215/220$0.72 $0.88 97.47% - 75.00%-0.04
2/10/2023DIABear CallMarch 24, 2023 355/360 $0.70 $0.67 83.01%-0.07
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%

Volatility Talk

After hovering below the 20 handle for most of the beginning of 2023, the investor fear gauge finally broke above the key level to close Friday at 20.53. Now the question is will the volatility push through the 50-day moving average and venture higher. If so, we could see continued weakness in the market. One thing is certain: The upcoming CPI will have at least a short-term impact, but once the dust settles I will be paying close attention to how the VIX trades as we move through February expiration and into the beginning of spring.

COI_QT_021323_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 February 13, 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 ETFARKK56.919.542.3
Proshares Bitcoin ETFBITO57.06.533.2
SPDR Dow JonesDIA18.315.550.2
iShares MSCI Emerging MarketsEEM20.48.133
iShares MSCI EAFEEFA17.05.143
iShares MSCI Mexico ETFEWW22.76.343.6
iShares MSCI BrazilEWZ35.226.437.3
iShares China Large-CapFXI33.016.333.5
Vaneck Gold MinersGDX35.87.328.3
SPDR Gold GLD15.25.334.1
iShares High-YieldHYG12.218.628.3
iShares Russell 2000IWM24.516.746.3
SPDR Regional BankKRE25.613.352.3
Vaneck Oil ServicesOIH40.410.158.6
Invesco Nasdaq 100QQQ27.519.651.4
iShares Silver TrustSLV29.28.926
Vaneck SemiconductorSMH35.619.251.8
SPDR S&P 500 SPY 20.717.451.6
iShares 20+ Treasury BondTLT18.26.928.1
United States Oil FundUSO35.20.360.4
Proshares Ultra VIX ShortUVXY115.027.362.4
CBOE Market Volatility IndexVIX96.226.660.5
Barclays S&P 500 VIX ETNVXX77.919.663
SPDR BiotechXLB21.59.540.7
SPDR Energy Select XLE29.510.660.7
SPDR FinancialsXLF21.213.153.7
SPDR UtilitiesXLU19.614.242.8
SPDR S&P Oil & Gas ExplorerXOP38.68.858.7
SPDR Retail XRT34.619.542.4

Stock Watch List – Trade Ideas

Ticker Symbol IVIV Rank HPMR Oversold - Overbought
AppleAAPL31.628.861.2
Bank of AmericaBAC28.21446.5
Bristol-Myers SquibbBMY22.423.643.3
CitigroupC29.414.435.9
CaterpillarCAT29.111.442.3
ComcastCMCSA28.913.539.9
CostcoCOST29.620.242.7
Cisco SystemsCSCO34.844.142
ChevronCVX28.74.247.4
DisneyDIS32.710.346.8
Duke EnergyDUK23.32137.8
FedexFDX33.320.167.1
Gilead SciencesGILD25.815.165
General MotorsGM35.78.370.3
IntelINTC38.123.837.4
Johnson & JohnsonJNJ17.914.530.5
JP MorganJPM24.611.953.5
Coca-ColaKO22.734.132
Altria GroupMO20.55.267.8
MerckMRK22.118.963
Morgan StanleyMS26.711.559.6
MicrosoftMSFT31.428.763.4
Nextera EnergyNEE29.124.640.1
NvidiaNVDA61.640.857.1
PfizerPFE23.95.142.8
PaypalPYPL42.43.648.8
StarbucksSBUX26.913.352.7
AT&TT23.81434.7
VerizonVZ23.220.534.9
Walgreens Boots AllianceWBA26.69.449.2
Wells FargoWFC27.79.264.3
WalmartWMT28.250.959.6
Exxon MobilXOM29.26.470.2

Weekly Trade Discussion: Open Positions

*Portfolio updated every Monday

Iron Condor: IWM March 17, 2023, 220/215 calls – 180/175 puts
Original trade published on 2-2-2023 (click to see original alert)

Background: At the time of the trade, IWM was trading for 197.85. We sold the March 17, 2023, IWM 220/215 – 180/175 iron condor for $0.72. The expected range was 187 to 208.

Current Thoughts: IWM is currently trading for 190.31 and our iron condor is worth $0.88. Our probability of success stands at 97.43% on the call side and 75.36% on the put side. We will need to keep a close eye on the put side. If the delta of the 180 pushes to 0.30 to 0.35 I intend on making an adjustment.

Call Side:

COI_QT_021213_IWM_bearcall.png

Put Side:

COI_QT_021223_IWM_bullput.png

Bear Call: SPY March 17, 2023, 440/445 Bear Call Spread
Original trade published on 2-2-2023 (click to see original alert)

Background: At the time of the trade, SPY was trading for roughly 416.34. We sold the March 17, 2023, SPY 440/445 bear call spread for $0.63. The expected range was 398 to 435.

Current Thoughts: SPY is currently trading for 408.04 and our bear call spread is worth $0.26. Our probability of success stands at 93.88%. Not much has changed; if SPY continues to push lower this week, we could easily find ourselves with the ability to take off our SPY bear call spread for a decent short-term profit.

Call Side:

COI_QT_021223_SPY_bearcall.png

Bear Call: DIA March 24, 2023, 355/360 Bear Call Spread
Original trade published on 2-9-2023 (click to see original alert)

Background: At the time of the trade, DIA was trading for roughly 338.17. We sold the March 24, 2023, DIA 355/360 bear call spread for $0.70. The expected range was 323 to 353.

Current Thoughts: DIA is currently trading for 338.73 and our bear call spread is worth $0.67. Our probability of success stands at 82.72%. We are early in the trade so there really isn’t much to discuss at the moment.

Call Side:

COI_QT_021223_DIA_bearcall.png


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

February 21, 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.