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 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 | $0.25 | 93.77% - 97.37% | 0 |
| 3/23/2023 | IWM | Iron Condor | May 19, 2023 196/191 - 147/142 | $0.83 | $0.79 | 89.84% - 87.04% | -0.03 |
| 3/23/2023 | DIA | Bear Call | April 21, 2023 338/443 | $0.62 | $0.56 | 86.63% | -0.07 |
| 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 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.
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 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 | 56.4 | 17.9 | 51.543.4 |
| Proshares Bitcoin ETF | BITO | 73.6 | 32.2 | 64 |
| SPDR Dow Jones | DIA | 20.7 | 35.5 | 47.6 |
| iShares MSCI Emerging Markets | EEM | 20.7 | 23.9 | 59.8 |
| iShares MSCI EAFE | EFA | 23.1 | 49.2 | 49.9 |
| iShares MSCI Mexico ETF | EWW | 27.1 | 27.9 | 55.2 |
| iShares MSCI Brazil | EWZ | 36.3 | 29.1 | 34.3 |
| iShares China Large-Cap | FXI | 33.5 | 22.8 | 64.9 |
| Vaneck Gold Miners | GDX | 42.4 | 38.2 | 72.8 |
| SPDR Gold | GLD | 19.9 | 65.7 | 64.7 |
| iShares High-Yield | HYG | 13.8 | 33.5 | 46.4 |
| iShares Russell 2000 | IWM | 29.0 | 41.4 | 37.8 |
| SPDR Regional Bank | KRE | 68.7 | 64.5 | 32.9 |
| Vaneck Oil Services | OIH | 49.2 | 45 | 29.2 |
| Invesco Nasdaq 100 | QQQ | 26.6 | 17 | 68.1 |
| iShares Silver Trust | SLV | 33.0 | 48.5 | 76 |
| Vaneck Semiconductor | SMH | 36.1 | 22.2 | 61.1 |
| SPDR S&P 500 | SPY | 22.3 | 23.9 | 52.9 |
| iShares 20+ Treasury Bond | TLT | 24.1 | 45.3 | 63.9 |
| United States Oil Fund | USO | 46.7 | 42.1 | 37.5 |
| Proshares Ultra VIX Short | UVXY | 133.0 | 45.4 | 46.8 |
| CBOE Market Volatility Index | VIX | 105.9 | 35.7 | 44.9 |
| Barclays S&P 500 VIX ETN | VXX | 91.5 | 44 | 47.6 |
| SPDR Biotech | XLB | 27.8 | 48 | 42.6 |
| SPDR Energy Select | XLE | 35.5 | 42.1 | 37.1 |
| SPDR Financials | XLF | 33.8 | 66.6 | 31.2 |
| SPDR Utilities | XLU | 24.3 | 43.4 | 49.7 |
| SPDR S&P Oil & Gas Explorer | XOP | 46.5 | 41.5 | 39.3 |
| SPDR Retail | XRT | 38.1 | 23.8 | 30.5 |
Stock Watch List – Trade Ideas
| Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought | |
| Apple | AAPL | 29.1 | 33.3 | 72.6 |
| Bank of America | BAC | 56.0 | 81.9 | 24.9 |
| Bristol-Myers Squibb | BMY | 24.0 | 42.9 | 53.4 |
| Citigroup | C | 53.4 | 81 | 28.8 |
| Caterpillar | CAT | 36.5 | 58.1 | 32.7 |
| Comcast | CMCSA | 34.8 | 38.7 | 42.5 |
| Costco | COST | 24.4 | 6.9 | 67.5 |
| Cisco Systems | CSCO | 24.1 | 16.2 | 61.9 |
| Chevron | CVX | 32.8 | 41 | 45.1 |
| Disney | DIS | 35.2 | 17.2 | 40.7 |
| Duke Energy | DUK | 26.2 | 36.1 | 48.1 |
| Fedex | FDX | 34.4 | 23.2 | 63.5 |
| Gilead Sciences | GILD | 28.7 | 88 | 54.6 |
| General Motors | GM | 46.8 | 47.1 | 30.7 |
| Intel | INTC | 45.1 | 53.2 | 63.9 |
| Johnson & Johnson | JNJ | 22.0 | 52 | 46.5 |
| JP Morgan | JPM | 40.1 | 70.9 | 33.3 |
| Coca-Cola | KO | 18.4 | 25.4 | 64.6 |
| Altria Group | MO | 23.8 | 34.5 | 29.1 |
| Merck | MRK | 26.5 | 74.9 | 40.5 |
| Morgan Stanley | MS | 46.6 | 80.4 | 31.5 |
| Microsoft | MSFT | 32.1 | 41 | 73 |
| Nextera Energy | NEE | 32.3 | 41.3 | 59.1 |
| Nvidia | NVDA | 51.2 | 17.3 | 74.2 |
| Pfizer | PFE | 24.6 | 18.8 | 49.6 |
| Paypal | PYPL | 45.9 | 28.6 | 48.1 |
| Starbucks | SBUX | 29.0 | 41.1 | 34.2 |
| AT&T | T | 30.3 | 44.9 | 55.6 |
| Verizon | VZ | 26.7 | 47.3 | 55.7 |
| Walgreens Boots Alliance | WBA | 39 | 49.9 | 36.9 |
| Wells Fargo | WFC | 52.9 | 79.5 | 23.8 |
| Walmart | WMT | 21.8 | 24 | 64 |
| Exxon Mobil | XOM | 35.6 | 39.4 | 41.8 |
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:
Put Side:
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:
Put Side:
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:
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.
