We locked in our first profit of the year last week, a 19.0% return in our IWM January 20, 2023, iron condor. With two weeks remaining in the trade, and only $0.06 worth of premium left, the most prudent move was to take the profits and risk off the table and move on to the next opportunity.
Thankfully, we were given a few opportunities last week and decided to pounce on them by adding two new trades to the mix, another IWM iron condor and another SPY bear call spread. Now the focus will be to add a bull put spread to the mix to balance out the deltas.
Current Portfolio
| Open Trades | |||||||
| Open Date | Ticker | Strategy | Trade | Open Price | Current Price | Current Probability | Delta |
| 1/4/2023 | IWM | Iron Condor | February 17, 2023 200/195 - 154/149 | $0.65 | $0.58 | 92.38% - 89.93% | -3 |
| 1/6/2023 | SPY | Bear Call | February 17, 2023 415/420 | $0.60 | $0.67 | 85.74% | -5 |
| 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% |
Volatility Talk
It’s Groundhog Day in the world of volatility. The investor’s fear gauge continues to bounce between 20 and 25 in what has been a range that has now extended for roughly two months. Until we break the range, whether it is to the upside or downside, I expect to see much more of the same, rangebound trading in the S&P 500.
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 9, 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 | 54.2 | 13.2 | 46.8 |
| Proshares Bitcoin ETF | BITO | 51.2 | 0.5 | 62.4 |
| SPDR Dow Jones | DIA | 18.1 | 8.7 | 60.7 |
| iShares MSCI Emerging Markets | EEM | 24.1 | 22.2 | 73.4 |
| iShares MSCI EAFE | EFA | 20.8 | 27.9 | 67.9 |
| iShares MSCI Mexico ETF | EWW | 23.0 | 15.1 | 72.8 |
| iShares MSCI Brazil | EWZ | 39.2 | 36.3 | 56.8 |
| iShares China Large-Cap | FXI | 37.0 | 27.1 | 73 |
| Vaneck Gold Miners | GDX | 39.5 | 33.4 | 73.6 |
| SPDR Gold | GLD | 16.3 | 10.7 | 70.1 |
| iShares High-Yield | HYG | 12.5 | 21.3 | 67.8 |
| iShares Russell 2000 | IWM | 24.9 | 11 | 58.9 |
| SPDR Regional Bank | KRE | 26.2 | 15.7 | 60.3 |
| Vaneck Oil Services | OIH | 44.7 | 14.6 | 60.8 |
| Invesco Nasdaq 100 | QQQ | 27.1 | 16.8 | 51.7 |
| iShares Silver Trust | SLV | 32.8 | 31.4 | 54.6 |
| Vaneck Semiconductor | SMH | 34.3 | 13.4 | 59.3 |
| SPDR S&P 500 | SPY | 21.0 | 16.3 | 57.5 |
| iShares 20+ Treasury Bond | TLT | 21.7 | 34.2 | 64.7 |
| United States Oil Fund | USO | 42.6 | 17.9 | 36.2 |
| Proshares Ultra VIX Short | UVXY | 84.0 | 1.2 | 26.2 |
| CBOE Market Volatility Index | VIX | 72.5 | 3.5 | 43.3 |
| Barclays S&P 500 VIX ETN | VXX | 59.3 | 2.4 | 26.5 |
| SPDR Biotech | XLB | 24.3 | 47.8 | 61.9 |
| SPDR Energy Select | XLE | 32.4 | 22.6 | 58.4 |
| SPDR Financials | XLF | 22.2 | 5.5 | 71.8 |
| SPDR Utilities | XLU | 20.0 | 22 | 53.3 |
| SPDR S&P Oil & Gas Explorer | XOP | 43.6 | 22.6 | 45 |
| SPDR Retail | XRT | 34.7 | 5.2 | 63.2 |
Stock Watch List – Trade Ideas
| Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought | |
| Apple | AAPL | 40.3 | 66.9 | 47.6 |
| Bank of America | BAC | 34.9 | 25.5 | 77.4 |
| Bristol-Myers Squibb | BMY | 24.1 | 38.5 | 47.3 |
| Citigroup | C | 37.2 | 30 | 75 |
| Caterpillar | CAT | 35.1 | 38.8 | 74.1 |
| Comcast | CMCSA | 38.2 | 47.2 | 81.5 |
| Costco | COST | 25.9 | 7.2 | 69.5 |
| Cisco Systems | CSCO | 24.2 | 12.2 | 59.5 |
| Chevron | CVX | 31.5 | 6.5 | 53.9 |
| Disney | DIS | 38.8 | 25.8 | 70.3 |
| Duke Energy | DUK | 22.7 | 24.3 | 65.3 |
| Fedex | FDX | 31.0 | 21.8 | 73.1 |
| Gilead Sciences | GILD | 29.6 | 35.5 | 73.1 |
| General Motors | GM | 43.2 | 23.3 | 62.2 |
| Intel | INTC | 48.7 | 55.9 | 74.4 |
| Johnson & Johnson | JNJ | 19.2 | 26.7 | 64.8 |
| JP Morgan | JPM | 29.8 | 25.9 | 75.3 |
| Coca-Cola | KO | 18.6 | 12.5 | 52.3 |
| Altria Group | MO | 22.9 | 13.4 | 61.7 |
| Merck | MRK | 23.7 | 30.8 | 81.8 |
| Morgan Stanley | MS | 34.6 | 30.6 | 59.4 |
| Microsoft | MSFT | 37.3 | 46.3 | 28.6 |
| Nextera Energy | NEE | 29.5 | 28.9 | 47.6 |
| Nvidia | NVDA | 56.1 | 25.8 | 46.9 |
| Pfizer | PFE | 30.1 | 30.6 | 49.2 |
| Paypal | PYPL | 59.0 | 40 | 69.8 |
| Starbucks | SBUX | 34.6 | 36.3 | 81.7 |
| AT&T | T | 29.3 | 41.3 | 77.9 |
| Verizon | VZ | 28.1 | 47 | 88.4 |
| Walgreens Boots Alliance | WBA | 28 | 14.9 | 37.5 |
| Wells Fargo | WFC | 35.7 | 24.8 | 66.9 |
| Walmart | WMT | 19.4 | 7.7 | 66.1 |
| Exxon Mobil | XOM | 31.4 | 15.3 | 61.4 |
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 roughly 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 178.13 and our iron condor is worth $0.58. Our probability of success stands at 89.66% on the call side and 92.49% on the put side. So far, so good. Simply stated, now we wait while time decay works its magic as we are very early in the trade.
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 389.90 and our bear call spread is worth $0.70. Our probability of success stands at 85.22%. Like our IWM iron condor, now we wait while time decay works its magic.
Call Side:
The next Cabot Options Institute – Quant Trader issue will be published on
January 17, 2023.