We added a bear call spread last week in SPY and plan to add an iron condor and bull put spread, if the market cooperates, this week. I’m still hopeful to sell premium for the December 16 expiration cycle, but have no issue kicking it out a week or two if it makes sense. The most important part is that we want the deltas of our portfolio to be balanced so we aren’t leaning too far in one direction.
Current Portfolio
| Open Trades | |||||||
| Open Date | Ticker | Strategy | Trade | Open Price | Current Price | Current Probability | Delta |
| 11/10/2022 | SPY | Bear Call Spread | December 16, 2022 420/425 | $0.65 | $0.99 | 80.55% | 0.21 |
| Closed Trades | |||||||
| 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% |
Volatility Talk
The VIX lost more ground last week as the overall market rallied. It marked the fifth straight week of declines for the investor fear gauge and has put the index firmly into one of the most oversold readings over the short, intermediate and long term seen in years. The 20 area should act as a strong area of support if we continue to see the market trend higher.
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 November 14, 2022.
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 | 61.9 | 40.9 | 68.6 |
| Proshares Bitcoin ETF | BITO | 116.0 | 54.6 | 29.9 |
| SPDR Dow Jones | DIA | 21.0 | 30.5 | 72.5 |
| iShares MSCI Emerging Markets | EEM | 25.1 | 35.3 | 78.3 |
| iShares MSCI EAFE | EFA | 24.5 | 27.3 | 80.7 |
| iShares MSCI Mexico ETF | EWW | 25.3 | 26.8 | 77.9 |
| iShares MSCI Brazil | EWZ | 54.7 | 73.9 | 40.7 |
| iShares China Large-Cap | FXI | 49.1 | 55.1 | 70.4 |
| Vaneck Gold Miners | GDX | 44.2 | 50.7 | 75.3 |
| SPDR Gold | GLD | 17.0 | 14.8 | 79.7 |
| iShares High-Yield | HYG | 15.1 | 41.5 | 65.6 |
| iShares Russell 2000 | IWM | 26.3 | 27.4 | 68.3 |
| SPDR Regional Bank | KRE | 27.8 | 12.4 | 63.6 |
| Vaneck Oil Services | OIH | 48.8 | 28.6 | 69.6 |
| Invesco Nasdaq 100 | QQQ | 28.0 | 48.8 | 68.1 |
| iShares Silver Trust | SLV | 34.1 | 46 | 74.6 |
| Vaneck Semiconductor | SMH | 37.4 | 34.4 | 79.4 |
| SPDR S&P 500 | SPY | 21.4 | 35.4 | 69.7 |
| iShares 20+ Treasury Bond | TLT | 20.7 | 28.4 | 62.2 |
| United States Oil Fund | USO | 41.4 | 22.4 | 55.8 |
| Proshares Ultra VIX Short | UVXY | 90.3 | 1.5 | 31.7 |
| CBOE Market Volatility Index | VIX | 85.6 | 13.2 | 22.4 |
| Barclays S&P 500 VIX ETN | VXX | 61.9 | 2.7 | 32.1 |
| SPDR Biotech | XLB | 24.8 | 42.2 | 79 |
| SPDR Energy Select | XLE | 35.4 | 26 | 64.8 |
| SPDR Financials | XLF | 24.7 | 16.1 | 76.1 |
| SPDR Utilities | XLU | 23.8 | 48.3 | 61.9 |
| SPDR S&P Oil & Gas Explorer | XOP | 45.6 | 8 | 62.3 |
| SPDR Retail | XRT | 36.3 | 21.2 | 70.5 |
Stock Watch List – Trade Ideas
| Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought | |
| Apple | AAPL | 34.6 | 42.5 | 61.2 |
| Bank of America | BAC | 30.3 | 14.5 | 79.3 |
| Bristol-Myers Squibb | BMY | 26.1 | 33 | 39.1 |
| Citigroup | C | 32.0 | 16.3 | 80.3 |
| Caterpillar | CAT | 34.4 | 36.7 | 80.5 |
| Comcast | CMCSA | 38.4 | 40.3 | 77.3 |
| Costco | COST | 33.6 | 33.6 | 72.9 |
| Cisco Systems | CSCO | 37.1 | 49.7 | 55 |
| Chevron | CVX | 32.0 | 33.7 | 66.8 |
| Disney | DIS | 35.9 | 22.7 | 43.3 |
| Duke Energy | DUK | 25.4 | 29.6 | 60.3 |
| Fedex | FDX | 36.6 | 36.6 | 83.8 |
| Gilead Sciences | GILD | 32.9 | 32.3 | 75.7 |
| General Motors | GM | 43.1 | 20.8 | 75.1 |
| Intel | INTC | 40.1 | 43.7 | 71.8 |
| Johnson & Johnson | JNJ | 21.4 | 27.6 | 40.1 |
| JP Morgan | JPM | 28.4 | 14.4 | 81.4 |
| Coca-Cola | KO | 21.0 | 20.6 | 71.9 |
| Altria Group | MO | 26.8 | 24.8 | 38.1 |
| Merck | MRK | 23.5 | 14.4 | 41.2 |
| Morgan Stanley | MS | 31.6 | 20.1 | 78.9 |
| Microsoft | MSFT | 32.3 | 33.3 | 67.6 |
| Nextera Energy | NEE | 31.2 | 53.3 | 77.1 |
| Nvidia | NVDA | 62.6 | 35.2 | 78.2 |
| Pfizer | PFE | 26.6 | 9.2 | 62.7 |
| Paypal | PYPL | 49.2 | 25.7 | 69.7 |
| Starbucks | SBUX | 32.7 | 32.2 | 75.3 |
| AT&T | T | 26.5 | 23 | 77.9 |
| Verizon | VZ | 24.9 | 27.6 | 63.9 |
| Walgreens Boots Alliance | WBA | 32.3 | 28.7 | 79.3 |
| Wells Fargo | WFC | 31 | 3.4 | 61.7 |
| Walmart | WMT | 30 | 57.7 | 61.8 |
| Exxon Mobil | XOM | 33.2 | 23.6 | 65.2 |
Weekly Trade Discussion: Open Positions
*Portfolio updated every Monday
Bear Call: SPY December 16, 2022, 420/425 calls
Original trade published on 11-10-2022 (click to see original alert)
Background: At the time of the trade, SPY was trading for 334.10. We sold the December 16, 2022, SPY 420/425 bear call for $0.65 with an 86.45% probability of success. The expected range was 367 to 414.
Current Thoughts: SPY is currently trading for 398.51 and our bear call is worth $1.00. Our probability of success stands at 80.61% and the probability of touch is 38.84%.
With 33 days left, our SPY bear call spread is in good shape.
The next Cabot Options Institute – Quant Trader issue will be published on November 21, 2022.
