Weekly Commentary
We closed out our DIA bear call spread last week for a 15.74% profit. Another winning trade should put us close to, if not above, our all-time highs in the portfolio.
This week, I intend to add one, if not two trades to the portfolio. My goal is to go out to the April 21, 2023 expiration cycle if possible, but with the April 21 expiration only 32 days away, I might have to go out a bit further in duration. Either way, expect to see several trade alerts as we progress through the week.
If you have any questions, please do not hesitate to email me at andy@cabotwealth.com.
Current Portfolio
Open Trades | |||||||
| Open Date | Ticker | Strategy | Trade | Open Price | Current Price | Current Probability | Delta |
| 2/23/2023 | SPY | Iron Condor | April 21, 2023 435/430 - 350/345 | $0.80 | $0.47 | 96.79% - 87.51% | 0 |
| 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% |
| 1/4/2023 | 2/1/2023 | IWM | Iron Condor | February 17, 2023 200/195 - 154/149 | $0.65 | $2.00 | -27.00% |
| 1/6/2023 | 2/2/2023 | SPY | Bear Call Spread | February 17, 2023 415/420 | $0.60 | $2.50 | -38.00% |
| 2/2/2023 | 2/15/2023 | SPY | Bear Call Spread | March 17, 2023 440/445 | $0.63 | $0.15 | 10.62% |
| 2/10/2023 | 2/22/2023 | DIA | Bear Call Spread | March 31, 2023 355/360 | $0.70 | $0.17 | 11.86% |
| 2/2/2023 | 3/1/2023 | IWM | Iron Condor | March 17, 2023 175/180 - 215/220 | $0.72 | $0.51 | 4.38% |
| 3/6/2023 | 3/13/2023 | DIA | Bear Call Spread | April 21, 2023 350/355 | $0.85 | $0.17 | 15.74% |
Volatility Talk
After testing the 30 handle for several straight days, the VIX finally settled to close last week at 25.51. Now the VIX trades above what has been months of range-bound trading for the investors’ fear gauge. However, after the jolt in implied volatility due to the uncertainty around bank contagion and Fed data, it wouldn’t be a surprise to see the VIX push back into the 18 to 23 range we’ve been witnessing for months.
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 March 20, 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 | 59.2 | 23.5 | 51.5 |
| Proshares Bitcoin ETF | BITO | 77.3 | 22.7 | 74.2 |
| SPDR Dow Jones | DIA | 23.3 | 41.4 | 34.3 |
| iShares MSCI Emerging Markets | EEM | 22.3 | 34.2 | 35.4 |
| iShares MSCI EAFE | EFA | 23.8 | 45.5 | 34.8 |
| iShares MSCI Mexico ETF | EWW | 29.2 | 41.7 | 34.1 |
| iShares MSCI Brazil | EWZ | 36.2 | 27.8 | 36.2 |
| iShares China Large-Cap | FXI | 34.8 | 26.9 | 37.9 |
| Vaneck Gold Miners | GDX | 41.8 | 35.5 | 77 |
| SPDR Gold | GLD | 22.8 | 80.9 | 84 |
| iShares High-Yield | HYG | 15.4 | 42.5 | 41.4 |
| iShares Russell 2000 | IWM | 33.2 | 62.2 | 26.1 |
| SPDR Regional Bank | KRE | 78.3 | 83.9 | 16.9 |
| Vaneck Oil Services | OIH | 53.6 | 59 | 17 |
| Invesco Nasdaq 100 | QQQ | 29.4 | 27.6 | 66.2 |
| iShares Silver Trust | SLV | 36.5 | 75.3 | 73.7 |
| Vaneck Semiconductor | SMH | 37.4 | 28.1 | 63.2 |
| SPDR S&P 500 | SPY | 25.8 | 42.1 | 42.3 |
| iShares 20+ Treasury Bond | TLT | 26.5 | 64.3 | 67.7 |
| United States Oil Fund | USO | 50.2 | 47.9 | 16.7 |
| Proshares Ultra VIX Short | UVXY | 155.4 | 67.7 | 62.7 |
| CBOE Market Volatility Index | VIX | 125.3 | 65.7 | 60.4 |
| Barclays S&P 500 VIX ETN | VXX | 104.9 | 64.3 | 65.1 |
| SPDR Biotech | XLB | 29.5 | 62.3 | 27.1 |
| SPDR Energy Select | XLE | 39.9 | 54.9 | 22.1 |
| SPDR Financials | XLF | 40.4 | 100.3 | 22.9 |
| SPDR Utilities | XLU | 25.0 | 55.7 | 56.6 |
| SPDR S&P Oil & Gas Explorer | XOP | 52.1 | 58.7 | 26.1 |
| SPDR Retail | XRT | 37.7 | 39.5 | 21.2 |
Stock Watch List – Trade Ideas
| Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought | |
| Apple | AAPL | 31.3 | 28.5 | 63.7 |
| Bank of America | BAC | 59.5 | 102.2 | 15.9 |
| Bristol-Myers Squibb | BMY | 25.6 | 55 | 34.5 |
| Citigroup | C | 59.2 | 98.7 | 29.5 |
| Caterpillar | CAT | 36.7 | 51.6 | 20.5 |
| Comcast | CMCSA | 34.8 | 33.2 | 44.8 |
| Costco | COST | 27.8 | 14.4 | 55.7 |
| Cisco Systems | CSCO | 25.7 | 15.9 | 71.5 |
| Chevron | CVX | 36.9 | 53.8 | 23.1 |
| Disney | DIS | 36.7 | 20.8 | 28.6 |
| Duke Energy | DUK | 24.0 | 30.6 | 55.6 |
| Fedex | FDX | 35.8 | 27.1 | 73.3 |
| Gilead Sciences | GILD | 28.4 | 61.5 | 21.5 |
| General Motors | GM | 48.7 | 53.4 | 15.2 |
| Intel | INTC | 43.5 | 41.3 | 76.3 |
| Johnson & Johnson | JNJ | 22.5 | 52 | 37.3 |
| JP Morgan | JPM | 47.4 | 100.1 | 30.1 |
| Coca-Cola | KO | 20.6 | 29.7 | 51.9 |
| Altria Group | MO | 27.5 | 44.2 | 24.2 |
| Merck | MRK | 27.5 | 72.2 | 31 |
| Morgan Stanley | MS | 50.1 | 99.2 | 23.2 |
| Microsoft | MSFT | 32.7 | 36.3 | 82.2 |
| Nextera Energy | NEE | 30.7 | 33.1 | 62.7 |
| Nvidia | NVDA | 55.1 | 24 | 75.3 |
| Pfizer | PFE | 26.2 | 13.4 | 40.7 |
| Paypal | PYPL | 45.3 | 16.3 | 38.1 |
| Starbucks | SBUX | 30.3 | 26.9 | 31.1 |
| AT&T | T | 30.4 | 47.7 | 27.8 |
| Verizon | VZ | 28.5 | 46.2 | 34 |
| Walgreens Boots Alliance | WBA | 41.1 | 55.5 | 27 |
| Wells Fargo | WFC | 58.7 | 106 | 23.6 |
| Walmart | WMT | 23.1 | 24.7 | 50.6 |
| Exxon Mobil | XOM | 39.1 | 55.4 | 13.1 |
Weekly Trade Discussion: Open Positions
*Portfolio updated every Monday
Iron Condor: SPY April 21, 2023, 435/430 calls – 350/345 puts
Original trade published on 2-23-2023 (click to see original alert)
Background: At the time of the trade, SPY was trading for 397.25. We sold the April 21, 2023, SPY 435/430 – 350/345 iron condor for $0.80. The expected range was 373 to 422.
Current Thoughts: SPY is currently trading for 389.99 and our iron condor is worth $0.47. Our probability of success stands at 96.83% on the call side and 87.41% on the put side. So far, so good. With 32 days left until expiration, time decay should really start to accelerate. My hope is that we can hold until there are roughly 21 days left until expiration. At that point, we should be able to take off the spread for a nice profit.
Call Side:
Put Side:
As always, if you have any questions, please feel free to email me at andy@cabotwealth.com.
The next Cabot Options Institute – Quant Trader issue will be published on
March 27, 2023.