Cabot Options Institute – Quant Trader Issue: February 27, 2023

Weekly Earnings Commentary

We locked in an 11.86% return in our DIA March 17, 2023, 355/360 bear call spread last week. The return marks our second winning trade for the March expiration cycle for a total of 22.48%. Our average holding time for both trades was 12 days.

As it stands, we currently have two iron condor positions, and my hope is to add another position, preferably a bear call spread, early this week. If we see even a mild bounce in IWM we should be able to take off our IWM iron condor for another nice return, thereby building upon our current profits for the March expiration cycle. If our IWM trade works out we could see March expiration bring in close to, if not exceeding, 40% on a cumulative basis.

If you have any questions, please do not hesitate to email me at andy@cabotwealth.com.

Current Portfolio

Volatility Talk

The VIX finally broke out of its near-term range of 18 to 20, trading as high as 23 before closing out the week at 21.67. My hope is that we continue to see heightened levels of implied volatility so that we have premium selling opportunities at our disposal. So far, the market has cooperated, with mean reversion kicking in. The question is, will the trend higher last? If so, we will certainly see more opportunities ahead. My hope is that the VIX can kick above 23 and sustain that level for a while, but that’s going to be tougher than it looks. However, I’m not completely sold on the fact that this market, after 13 years of a bull market due to easy money policies, is going to simply fly higher. There are a lot of headwinds currently in the market and until we see some of those issues (inflation, geopolitical tension, etc.) resolve themselves, I believe the bull market in volatility will continue.

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 27, 2023.

Here are the various levels I use to determine if an ETF is in an oversold or overbought state.

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

Stock Watch List – Trade Ideas

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 187.51 and our iron condor is worth $0.85. Our probability of success stands at 99.35% on the call side and 74.26% on the put side. We will continue to keep a close eye on the put side.

As it stands, our IWM iron condor continues to be in great shape, even with the recent pullback, 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 a nice profit.

Call Side:

Put Side:

Iron Condor: SPY April 21, 2023, 435/430 calls – 350/345 puts
Original trade published on 2-23-2023 (click to see original alert)

Background: At the time of the trade, SPY was trading for 397.25. We sold the April 21, 2023, SPY 435/430 – 350/345 iron condor for $0.80. The expected range was 373 to 422.

Current Thoughts: SPY is currently trading for 396.38 and our iron condor is worth $0.75. Our probability of success stands at 90.74% on the call side and 88.89% on the put side. So far, so good.

Call Side:

Put Side:

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

March 6, 2023.