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Quant Trader
Expert-Level Options for Sophisticated Traders

Cabot Options Institute – Quant Trader Issue: March 27, 2023

Weekly Commentary

We added two new positions last week, an iron condor in IWM and a bear call spread in DIA. As a result, we have three open positions, all of which are currently in profitable territory. My hope is that we can add a bull put spread to the mix this week to balance out our deltas as they are currently leaning slightly bearish. And while I’m not opposed to some bearish-leaning deltas, I would still like to bring in more premium in May and, at the moment, a bull put spread makes the most sense.

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

Current Portfolio

Open Trades
Open DateTickerStrategyTradeOpen PriceCurrent PriceCurrent ProbabilityDelta
2/23/2023SPYIron CondorApril 21, 2023 435/430 - 350/345$0.80 $0.25 93.77% - 97.37%0
3/23/2023IWMIron CondorMay 19, 2023 196/191 - 147/142$0.83 $0.79 89.84% - 87.04%-0.03
3/23/2023DIABear CallApril 21, 2023 338/443$0.62 $0.56 86.63%-0.07
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%
1/4/20232/1/2023IWMIron CondorFebruary 17, 2023 200/195 - 154/149$0.65 $2.00 -27.00%
1/6/20232/2/2023SPYBear Call SpreadFebruary 17, 2023 415/420 $0.60 $2.50 -38.00%
2/2/20232/15/2023SPYBear Call SpreadMarch 17, 2023 440/445$0.63 $0.15 10.62%
2/10/20232/22/2023DIABear Call SpreadMarch 31, 2023 355/360$0.70 $0.17 11.86%
2/2/20233/1/2023IWMIron CondorMarch 17, 2023 175/180 - 215/220$0.72 $0.51 4.38%
3/6/20233/13/2023DIABear Call SpreadApril 21, 2023 350/355$0.85 $0.17 15.74%

Volatility Talk

After testing the 30 handle intraday several weeks ago, the VIX finally settled down last week to close at 21.74. Now the VIX, once again, sits well within the 18 to 23 trading range that was established back in mid-November. That being said, volatility remains at a fairly heightened level on a historical basis. As a result, selling premium continues to be an incredibly viable response to the ongoing volatility that persists.

COI_QT_032623_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 March 27, 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 ETFARKK56.417.951.543.4
Proshares Bitcoin ETFBITO73.632.264
SPDR Dow JonesDIA20.735.547.6
iShares MSCI Emerging MarketsEEM20.723.959.8
iShares MSCI EAFEEFA23.149.249.9
iShares MSCI Mexico ETFEWW27.127.955.2
iShares MSCI BrazilEWZ36.329.134.3
iShares China Large-CapFXI33.522.864.9
Vaneck Gold MinersGDX42.438.272.8
SPDR Gold GLD19.965.764.7
iShares High-YieldHYG13.833.546.4
iShares Russell 2000IWM29.041.437.8
SPDR Regional BankKRE68.764.532.9
Vaneck Oil ServicesOIH49.24529.2
Invesco Nasdaq 100QQQ26.61768.1
iShares Silver TrustSLV33.048.576
Vaneck SemiconductorSMH36.122.261.1
SPDR S&P 500 SPY 22.323.952.9
iShares 20+ Treasury BondTLT24.145.363.9
United States Oil FundUSO46.742.137.5
Proshares Ultra VIX ShortUVXY133.045.446.8
CBOE Market Volatility IndexVIX105.935.744.9
Barclays S&P 500 VIX ETNVXX91.54447.6
SPDR BiotechXLB27.84842.6
SPDR Energy Select XLE35.542.137.1
SPDR FinancialsXLF33.866.631.2
SPDR UtilitiesXLU24.343.449.7
SPDR S&P Oil & Gas ExplorerXOP46.541.539.3
SPDR Retail XRT38.123.830.5

Stock Watch List – Trade Ideas

Ticker Symbol IVIV Rank HPMR Oversold - Overbought
AppleAAPL29.133.372.6
Bank of AmericaBAC56.081.924.9
Bristol-Myers SquibbBMY24.042.953.4
CitigroupC53.48128.8
CaterpillarCAT36.558.132.7
ComcastCMCSA34.838.742.5
CostcoCOST24.46.967.5
Cisco SystemsCSCO24.116.261.9
ChevronCVX32.84145.1
DisneyDIS35.217.240.7
Duke EnergyDUK26.236.148.1
FedexFDX34.423.263.5
Gilead SciencesGILD28.78854.6
General MotorsGM46.847.130.7
IntelINTC45.153.263.9
Johnson & JohnsonJNJ22.05246.5
JP MorganJPM40.170.933.3
Coca-ColaKO18.425.464.6
Altria GroupMO23.834.529.1
MerckMRK26.574.940.5
Morgan StanleyMS46.680.431.5
MicrosoftMSFT32.14173
Nextera EnergyNEE32.341.359.1
NvidiaNVDA51.217.374.2
PfizerPFE24.618.849.6
PaypalPYPL45.928.648.1
StarbucksSBUX29.041.134.2
AT&TT30.344.955.6
VerizonVZ26.747.355.7
Walgreens Boots AllianceWBA3949.936.9
Wells FargoWFC52.979.523.8
WalmartWMT21.82464
Exxon MobilXOM35.639.441.8

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 395.75 and our iron condor is worth $0.25. Our probability of success stands at 97.29% on the call side and 93.86% on the put side. So far, so good. With 25 days left until expiration time decay should really start to accelerate. As I stated over the past few weeks, my hope is that we can hold until there are roughly 21 days left until expiration, which comes this Friday. At that point, we should be able to take off the spread for a nice profit. If we have to take our SPY iron condor off prior to Friday, no worries, we should still be able to lock in a juicy profit on the trade. Of course, if we go into Friday right at the middle of our range, there is a good chance I continue to hold the position, potentially through expiration.

Call Side:

COI_QT_032623_SPY_bearcall.png

Put Side:

COI_QT_032623_SPY_bullput.png

Iron Condor: IWM May 19, 2023, 196/191 calls – 147/142 puts

Original trade published on 3-23-2023 (click to see original alert)

Background: At the time of the trade, IWM was trading for 172.95. We sold the May 19, 2023, IWM 196/191 – 147/142 iron condor for $0.83. The expected range or move was 159 to 187.

Current Thoughts: We are less than one full week into the trade so there really isn’t much to discuss at the moment. My goal is to take the trade off when there are around 30 days left until expiration, but price action and implied volatility will define whether that is possible. Until then we will patiently wait for time decay to work its magic.

Call Side:

COI_QT_032623_IWM_bearcall.png

Put Side:

COI_QT_032623_IWM_bullput.png

Bear Call: DIA April 21, 2023, 338/343 calls

Original trade published on 3-23-2023 (click to see original alert)

Background: At the time of the trade, DIA was trading for 323.20. We sold the April 21, 2023, DIA 338/343 bear call spread for $0.62. The expected range or move was 310 to 336.

Current Thoughts: We are less than one full week into the trade, but since we went with a shorter duration, price direction and time decay will play a major factor in the result. With only 25 days left until expiration, the bear call spread is currently worth $0.56 and the probability of success stands at a comfortable 85.86%. Any sharp decline over the next week or so and I intend to take off the trade for a decent short-term profit. Otherwise, again, we will allow time decay to work its magic in hopes that DIA will stay below our short call of 338, at expiration, which is currently 4.9% away.

Call Side:

COI_QT_032623_DIA_bearcall.png

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

April 3, 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.