COI Quant Trader Issue: May 8, 2023

Weekly Commentary

We locked in a small 6.8% profit in our SPY iron condor last week and added another bear call spread, in SPY, to the mix later in the week. Our total cumulative return stands at 124.52% with a win ratio of 87.1% (27/31 winning trades) since we started Quant Trader just under one year ago.

We have two positions on at the moment, both due to expire at the June 16 expiration date. Fortunately, both are hovering around the same price we sold them for, so all is well at the moment. And given we are leaning bearish in both positions, a move lower will obviously immediately help both positions and possibly lead to some early profit taking.

My hope this week is to add one more trade to the June 16 expiration cycle, preferably a bullish leaning trade to balance out the deltas in the portfolio. Otherwise, we will simply sit on our hands and allow time decay to work in our favor.

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

Current Portfolio

Volatility Talk

The VIX continues to bounce around the 17 to 20 range. This past week was eerily similar to the week before.

The short-term overbought state led to a short-term pullback for several straight days. However, the decline, once again, didn’t last long as the bulls stepped back in Friday to help push the S&P back to where it started the week and led the VIX back down into the 17 handle. IV ranks continue to be incredibly low across the board in several of the stocks that have led this market higher. If those same companies revert back to normal levels of implied volatility we could see a decent pullback as we enter the “sell in May” period. If not, and IV ranks continue to trend lower and lower, well, expect to see a rising market and more complacent times in the market…a situation the bulls are certainly craving after dealing with 18 months of a tumultuous and widely vacillating market.

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 May 8, 2023.

Here are the various levels I use to determine if an ETF is in an oversold or overbought state.

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

Stock Watch List – Trade Ideas

Weekly Trade Discussion: Open Positions

*Portfolio updated every Monday

Bear Call: SPY June 16, 2023, 430/435 calls

Original trade published on 5-5-2023 (click to see original alert)

Background: At the time of the trade, SPY was trading for 411. We sold the June 16, 2023, SPY 430/435 bear call spread for $0.72. The expected range or move was 393 to 429.

Current Thoughts: So far, so good. Our bear call is currently trading for $0.85, slightly above where we sold our bear call spread. Since our position is a tad bearish leaning, a move lower would help to decrease the amount of premium in the trade which is good for the position. My goal is to take off the position prior to 21 days left until expiration. Of course, Mr. Market will dictate whether or not that is possible.

Call Side:

Bear Call: DIA June 16, 2023, 354/359 calls

Original trade published on 4-24-2023 (click to see original alert)

Background: At the time of the trade, DIA was trading for 338.15. We sold the June 16, 2023, DIA 354/359 bear call spread for $0.72. The expected range or move was 321 to 353.

Current Thoughts: With DIA currently trading for 336.73, our bear call is trading for $0.51 and in profitable territory. Our probability of success sits at 88.31%. Moreover, our cushion to the upside sits at just over $17, or 5.1%.

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

May 15, 2023.