Cabot Options Institute – Quant Trader Issue: February 6, 2023

Weekly Earnings Commentary

We took a few losses last week, which at the moment looks a bit premature.

At the time I wrote, “Well, I think we all knew the time would eventually come. We are going to close out our February IWM iron condor as it has reached our stop-loss. This marks our first loss since August 11 and only our second since initiating the Quant Trader service back in early June.”

The market was in a short-term overbought state, so while I was hesitant to take off the two trades, mechanically it made sense and it’s the mechanics that keep us out of trouble and give us the opportunity for long-term successful results.

Once we closed out both trades, we immediately opened two new positions, and both look good at the moment. Of course, we are early in the expiration cycle, but so far, so good. In fact, there is a good chance we might have the opportunity to lock in some early profits on our most recent SPY bear call spread.

This week my hope is to add a few additional March expiration cycle positions so that we can balance out the deltas. As it stands we are leaning slightly bearish.

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

Current Portfolio

Volatility Talk

Volatility continues to be mired in a short-term oversold state and this can easily be seen in the IV ranks of almost every stock with highly liquid options. When we see IV ranks across the board nearing 12-month lows, mean reversion typically rears its head. If mean reversion makes an appearance I would expect to see the VIX push back into the 20 to 25 range which would certainly be welcome as someone who predominantly sells options for a living.

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 6, 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 196.99 and our iron condor is worth $0.73. Our probability of success stands at 92.20% on the call side and 83.72% on the put side.

We are early in the trade so there really isn’t much to discuss at the moment.

Call Side:

Put Side:

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 412.35 and our bear call spread is worth $0.44. Our probability of success stands at 90.08%. If SPY continues Friday’s 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:

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

February 13, 2023.