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Quant Trader
Expert-Level Options for Sophisticated Traders

Cabot Options Institute – Quant Trader Issue: January 9, 2023

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 DateTickerStrategyTradeOpen PriceCurrent PriceCurrent ProbabilityDelta
1/4/2023IWMIron CondorFebruary 17, 2023 200/195 - 154/149$0.65 $0.58 92.38% - 89.93%-3
1/6/2023SPYBear CallFebruary 17, 2023 415/420$0.60 $0.67 85.74%-5
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%
12/7/20231/6/2023IWMIron CondorJanuary 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.

COI_QT_010923_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 9, 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 ETFARKK54.213.246.8
Proshares Bitcoin ETFBITO51.20.562.4
SPDR Dow JonesDIA18.18.760.7
iShares MSCI Emerging MarketsEEM24.122.273.4
iShares MSCI EAFEEFA20.827.967.9
iShares MSCI Mexico ETFEWW23.015.172.8
iShares MSCI BrazilEWZ39.236.356.8
iShares China Large-CapFXI37.027.173
Vaneck Gold MinersGDX39.533.473.6
SPDR Gold GLD16.310.770.1
iShares High-YieldHYG12.521.367.8
iShares Russell 2000IWM24.91158.9
SPDR Regional BankKRE26.215.760.3
Vaneck Oil ServicesOIH44.714.660.8
Invesco Nasdaq 100QQQ27.116.851.7
iShares Silver TrustSLV32.831.454.6
Vaneck SemiconductorSMH34.313.459.3
SPDR S&P 500 SPY 21.016.357.5
iShares 20+ Treasury BondTLT21.734.264.7
United States Oil FundUSO42.617.936.2
Proshares Ultra VIX ShortUVXY84.01.226.2
CBOE Market Volatility IndexVIX72.53.543.3
Barclays S&P 500 VIX ETNVXX59.32.426.5
SPDR BiotechXLB24.347.861.9
SPDR Energy Select XLE32.422.658.4
SPDR FinancialsXLF22.25.571.8
SPDR UtilitiesXLU20.02253.3
SPDR S&P Oil & Gas ExplorerXOP43.622.645
SPDR Retail XRT34.75.263.2

Stock Watch List – Trade Ideas

Ticker Symbol IVIV Rank HPMR Oversold - Overbought
AppleAAPL40.366.947.6
Bank of AmericaBAC34.925.577.4
Bristol-Myers SquibbBMY24.138.547.3
CitigroupC37.23075
CaterpillarCAT35.138.874.1
ComcastCMCSA38.247.281.5
CostcoCOST25.97.269.5
Cisco SystemsCSCO24.212.259.5
ChevronCVX31.56.553.9
DisneyDIS38.825.870.3
Duke EnergyDUK22.724.365.3
FedexFDX31.021.873.1
Gilead SciencesGILD29.635.573.1
General MotorsGM43.223.362.2
IntelINTC48.755.974.4
Johnson & JohnsonJNJ19.226.764.8
JP MorganJPM29.825.975.3
Coca-ColaKO18.612.552.3
Altria GroupMO22.913.461.7
MerckMRK23.730.881.8
Morgan StanleyMS34.630.659.4
MicrosoftMSFT37.346.328.6
Nextera EnergyNEE29.528.947.6
NvidiaNVDA56.125.846.9
PfizerPFE30.130.649.2
PaypalPYPL59.04069.8
StarbucksSBUX34.636.381.7
AT&TT29.341.377.9
VerizonVZ28.14788.4
Walgreens Boots AllianceWBA2814.937.5
Wells FargoWFC35.724.866.9
WalmartWMT19.47.766.1
Exxon MobilXOM31.415.361.4

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:

COI_QT_010923_IWM_bearcall.png

Put Side:

COI_QT_010923_IWM_bullput.png

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:

COI_QT_010923_SPY_bearcall.png


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

January 17, 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.