Weekly Earnings Commentary
We locked in our first profit since our two losing trades back at the beginning of February, near the near-term highs for the S&P 500.
Our SPY March 17, 2023, 440/445 bear call spread that we sold for $0.63 on February 2 was only worth $0.15 after the pullback in SPY mid-week. As a result, we decided to lock in the $0.48, or 10.6%, and take all risk off the table. With over three weeks left in the trade it didn’t make sense to continue to hold on to the trade for the potential to make an additional $0.15. By taking the trade off early we eliminate all risk and are able to use our trade capital for other opportunities. My hope is that we see an opportunity or two come our way this week as I would love to add a few more spreads to the mix.
If you have any questions, please do not hesitate to email me at firstname.lastname@example.org.
|Open Date||Ticker||Strategy||Trade||Open Price||Current Price||Current Probability||Delta|
|2/2/2023||IWM||Iron Condor||March 17, 2023 175/180 - 215/220||$0.72||$0.51||98.10% - 83.44%||0.05|
|2/10/2023||DIA||Bear Call||March 24, 2023 355/360||$0.70||$0.51||83.01%||-0.06|
|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%|
|12/13/2022||12/15/2022||SPY||Bear Call Spread||January 20, 2023 430/435||$0.54||$0.17||7.99%|
|12/7/2023||1/6/2023||IWM||Iron Condor||January 20, 2023 202/198 - 160/156||$0.70||$0.06||19.00%|
|1/4/2023||2/1/2023||IWM||Iron Condor||February 17, 2023 200/195 - 154/149||$0.65||$2.00||-27.00%|
|1/6/2023||2/2/2023||SPY||Bear Call Spread||February 17, 2023 415/420||$0.60||$2.50||-38.00%|
|2/2/2023||2/15/2023||SPY||Bear Call Spread||March 17, 2023 440/445||$0.63||$0.15||10.62%|
The VIX continues to trade in a range, albeit now at the top of the near-term range. For roughly a month we’ve seen volatility bounce between 18 and 20. Will this time be different? The news cycle is certainly trying its hardest to create fear in the market with ongoing geopolitical tensions seemingly ramping up again, persistent inflationary concerns and a market that has pushed higher since October and now is showing signs of fatigue. No matter the reason, if we continue to see a pullback, the VIX should certainly get back on track and push higher. How far is anyone’s guess, but the hope is that we can continue to consistently sell premium at elevated levels.
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 20, 2023.
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||57.5||20.7||55.7|
|Proshares Bitcoin ETF||BITO||69.4||17.6||75.5|
|SPDR Dow Jones||DIA||17.9||14||45.7|
|iShares MSCI Emerging Markets||EEM||19.8||4.3||27.1|
|iShares MSCI EAFE||EFA||16.5||13||48.5|
|iShares MSCI Mexico ETF||EWW||21.8||8.6||73.3|
|iShares MSCI Brazil||EWZ||34.6||21.2||50.5|
|iShares China Large-Cap||FXI||32.8||13.9||29.1|
|Vaneck Gold Miners||GDX||35.9||9.9||18.4|
|iShares Russell 2000||IWM||23.4||10.5||54.5|
|SPDR Regional Bank||KRE||23.8||7.5||51.4|
|Vaneck Oil Services||OIH||41.3||10.5||35.1|
|Invesco Nasdaq 100||QQQ||26.2||14.1||48.1|
|iShares Silver Trust||SLV||28.1||2.5||30.2|
|SPDR S&P 500||SPY||21.0||15.9||45.1|
|iShares 20+ Treasury Bond||TLT||18.6||11.6||33|
|United States Oil Fund||USO||36.9||4.2||38.5|
|Proshares Ultra VIX Short||UVXY||108.5||23.7||51.8|
|CBOE Market Volatility Index||VIX||82.6||22.8||54.5|
|Barclays S&P 500 VIX ETN||VXX||73.4||15.8||51.6|
|SPDR Energy Select||XLE||30.6||15.1||29.7|
|SPDR S&P Oil & Gas Explorer||XOP||40.5||17.1||31.7|
Stock Watch List – Trade Ideas
|Ticker Symbol||IV||IV Rank||HPMR Oversold - Overbought|
|Bank of America||BAC||25.8||6.2||40.9|
|Johnson & Johnson||JNJ||17.9||14.3||37.7|
|Walgreens Boots Alliance||WBA||27.1||10.5||52.3|
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 193.31 and our iron condor is worth $0.51. Our probability of success stands at 98.13% on the call side and 83.26% on the put side. We will need to keep a close eye on the put side.
As it stands, our IWM iron condor is in great shape, but as I stated last week, if the delta of the 180 put strike pushes to 0.30 to 0.35 I intend on making an adjustment. But if IWM continues to trade around this area, if not slightly higher, we should be able to take off our trade for early profits.
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 338.29 and our bear call spread, like our IWM iron condor, is worth $0.51. Our probability of success stands at 88.02%. Additionally, our margin of error stands at 4.9%. So far, so good.
If DIA continues to trend lower over the short-term, we should have the opportunity to lock in some decent profits.
The next Cabot Options Institute – Quant Trader issue will be published on
February 27, 2023.