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Quant Trader
Expert-Level Options for Sophisticated Traders

Cabot Options Institute – Quant Trader Issue: January 3, 2023

Happy New Year!

I hope everyone had a wonderful and safe holiday season! Once again, as we enter our last holiday-shortened week, I’m going to keep it short. We currently have one trade on, our IWM iron condor, which looks great at the moment. In fact, it looks like we might see a max win on this one of over 20%. However, the plan this week is to add a bit more exposure to the mix. I want to add another iron condor and hopefully a bull put and bear call for the February expiration cycle. The first goal is to add the February iron condor and then work the other two strategies into the portfolio as the market environment dictates.

But as we enter the first week of 2023, let us not forget how wonderful 2022 was for our Quant Trader service. We ended the year with 19 out of 20 winning trades for a 125% cumulative return. Given the market environment last year, I couldn’t be more pleased with the results in my first (half) year here at Cabot Wealth. And here’s hoping 2023 is even better!

Current Portfolio

Open Trades
Open DateTickerStrategyTradeOpen PriceCurrent PriceCurrent ProbabilityDelta
12/7/2022IWMIron CondorJanuary 20, 2023 202/198 - 160/156$0.70 $0.22 98.83% - 90.91%4
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%

Volatility Talk

Nothing new here. For weeks now the volatility gauge has been floating in a fairly tight trading range between roughly 20 and 25. Until it breaks that range, with conviction, I expect we should continue to see some decent premium opportunities, especially if the VIX trades towards the higher side of the range and beyond.

Since we are nearing earnings season I do expect to see the week’s long range to be breached; the question is, will it be to the upside or downside? One thing is certain: We shall see soon enough.

COI_QT_010323_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 January 3, 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 ETFARKK57.126.840.6
Proshares Bitcoin ETFBITO59.42.445.8
SPDR Dow JonesDIA19.214.746.3
iShares MSCI Emerging MarketsEEM22.519.844.9
iShares MSCI EAFEEFA20.431.145.1
iShares MSCI Mexico ETFEWW24.98.531.2
iShares MSCI BrazilEWZ39.336.146.5
iShares China Large-CapFXI38.631.250.9
Vaneck Gold MinersGDX39.236.347
SPDR Gold GLD15.98.563.6
iShares High-YieldHYG12.827.742.7
iShares Russell 2000IWM25.313.446.6
SPDR Regional BankKRE26.516.851.5
Vaneck Oil ServicesOIH45.419.559.5
Invesco Nasdaq 100QQQ27.729.739.9
iShares Silver TrustSLV33.031.458.6
Vaneck SemiconductorSMH36.325.839.6
SPDR S&P 500 SPY 21.723.444.5
iShares 20+ Treasury BondTLT22.844.227
United States Oil FundUSO40.515.667.6
Proshares Ultra VIX ShortUVXY96.98.837.2
CBOE Market Volatility IndexVIX77.06.949.2
Barclays S&P 500 VIX ETNVXX68.610.438.1
SPDR BiotechXLB24.931.138.2
SPDR Energy Select XLE33.728.156.6
SPDR FinancialsXLF23.89.651.5
SPDR UtilitiesXLU21.325.846.1
SPDR S&P Oil & Gas ExplorerXOP44.927.849
SPDR Retail XRT35.011.845.4

Stock Watch List – Trade Ideas

Ticker Symbol IVIV Rank HPMR Oversold - Overbought
AppleAAPL40.970.537
Bank of AmericaBAC34.925.557.7
Bristol-Myers SquibbBMY25.244.620.6
CitigroupC37.329.856.2
CaterpillarCAT34.538.856.4
ComcastCMCSA40.251.450.5
CostcoCOST27.816.932.3
Cisco SystemsCSCO25.915.947.8
ChevronCVX31.98.762.8
DisneyDIS38.326.842.2
Duke EnergyDUK21.622.957.8
FedexFDX34.832.148.3
Gilead SciencesGILD27.625.551.4
General MotorsGM44.228.834.1
IntelINTC48.755.543.8
Johnson & JohnsonJNJ21.148.146.2
JP MorganJPM31.532.465.4
Coca-ColaKO18.914.951.2
Altria GroupMO23.118.238.6
MerckMRK22.425.454.9
Morgan StanleyMS35.834.936.9
MicrosoftMSFT36.543.945.3
Nextera EnergyNEE29.131.744.1
NvidiaNVDA57.829.834.5
PfizerPFE27.122.446.9
PaypalPYPL52.427.356
StarbucksSBUX32.225.248.3
AT&TT30.243.448
VerizonVZ29.35071.1
Walgreens Boots AllianceWBA37.345.219.3
Wells FargoWFC35.724.739.5
WalmartWMT21.719.432.7
Exxon MobilXOM31.818.162.9

Weekly Trade Discussion: Open Positions

*Portfolio updated every Monday

Iron Condor: IWM January 20, 2023, 202/198 calls – 160/156 puts
Original trade published on 12-7-2022 (click to see original alert)

Background: At the time of the trade, IWM was trading for roughly 180.49. We sold the January 20, 2023, IWM 202/198 – 160/156 iron condor for $0.70. The expected range was 168 to 193.

Current Thoughts: IWM is currently trading for 174.36 and our iron condor is worth $0.22. Our probability of success stands at 98.76% on the call side and 91.36% on the put side. So far, so good. As I stated over the last few weeks, now we wait while time decay works its magic. As it stands, we have the ability to take off our iron condor for $0.32 and lock in over 50% of the original premium sold. But given the high probabilities at the moment, I intend to hold on a bit longer.

Call Side:

COI_QT_010323_IWM_call.png

Put Side:

COI_QT_010323_IWM_put.png


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

January 9, 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.