Cabot Options Institute – Quant Trader Issue: January 30, 2023

Weekly Earnings Commentary

I wanted to start adding a few March positions last week, but decided to push them off towards the beginning of this week. I intend on adding at least two, if not three, March expiration trades this week as we are only 46 days away from the March 17, 2023 expiration cycle.

As for our current positions, our deltas are leaning towards the bearish side of things, so I would prefer to sell a bull put spread or two to balance out our deltas, but it’s tough adding a bull put spread with a market so overbought on a short-term basis.

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

Current Portfolio

Volatility Talk

The VIX fell back again this week and now sits at the lows hit just a few weeks ago. The question is, will we see a continued push lower or will the oversold conditions in the VIX mean-revert and we see another pop higher?

We are seeing overbought conditions in the overall market, while hitting short-term oversold extremes in the VIX. Typically, this type of set-up leads to, at minimum, a short-term pullback in the market.

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 30, 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 February 17, 2023, 200/195 calls – 154/149 puts
Original trade published on 1-4-2023 (click to see original alert)

Background: At the time of the trade, IWM was trading for 180.49. We sold the February 17, 2023, IWM 200/195 – 154/149 iron condor for $0.60. The expected range was 164 to 189.

Current Thoughts: IWM is currently trading for 189.58 and our iron condor is worth $1.11. Our probability of success stands at 74.71% on the call side and 99.15% on the put side.

Obviously, the concern, as it stands, is the call side of the trade. We still have a 74.71% probability of success. But, if IWM continues to surge higher this week we will have to consider an adjustment or simply take off the trade for a small loss and move on to the next opportunity. If we do see a decent pullback over the coming week, possibly around the 183-185 area, we should have an opportunity to take the trade off the table for a decent profit.

Call Side:

Put Side:

Bear Call: SPY February 17, 2023, 415/420 Bear Call Spread

Original trade published on 1-6-2023 (click to see original alert)

Background: At the time of the trade, SPY was trading for roughly 386.20. We sold the February 17, 2023, SPY 415/420 bear call spread for $0.60. The expected range was 364 to 407.

Current Thoughts: SPY is currently trading for 405.68 and our bear call spread is worth $1.43. Our probability of success stands at 73.89%. We still have a decent margin of error on the trade and our probability of success is hovering around 75% so we aren’t concerned about the trade … yet. However, if SPY continues to push higher this week, we will need to make an adjustment or simply take the trade off the table.

If we see the opposite and SPY pushes lower, towards the 395-400 area, there is a good chance we can take the profit of the table for a decent return.

Call Side:

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

February 6, 2023.