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Quant Trader
Expert-Level Options for Sophisticated Traders

Cabot Options Institute – Quant Trader Issue: November 7, 2022

Last week, prior to the Fed announcement, I decided to close out our two remaining positions for the November expiration cycle. While, in hindsight, holding on through the event would have been the best path for maximizing profits, we did manage to lock in two small gains.

The returns makes it 14 profitable trades out of 15 for a cumulative return of 71.3% since starting Quant Trader back in the beginning of June. Not bad given the wildly volatile market we’ve experienced over the past five months.

This week we will ramp back up opening new positions, this time for the December expiration cycle. I want to stay flat until the elections are over but intend on adding at least three new positions over the next week or so. Stay tuned!

Last week, prior to the Fed announcement, I decided to close out our two remaining positions for the November expiration cycle. While, in hindsight, holding on through the event would have been the best path for maximizing profits, we did manage to lock in two small gains.

The returns makes it 14 profitable trades out of 15 for a cumulative return of 71.3% since starting Quant Trader back in the beginning of June. Not bad given the wildly volatile market we’ve experienced over the past five months.

This week we will ramp back up opening new positions, this time for the December expiration cycle. I want to stay flat until the elections are over but intend on adding at least three new positions over the next week or so. Stay tuned!

Current Portfolio

Open Trades
Open DateTickerStrategyTradeOpen PriceCurrent PriceCurrent ProbabilityDelta
Closed Trades
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%

Volatility Talk

The VIX continues to trade in a short-term oversold state so it wouldn’t surprise me to see a near-term bounce off oversold levels. As I stated last week, if a bounce occurs, we will intently watch how the index responds to the 28 level. Will it act as support or resistance? Alternatively, if the VIX continues to slide the 20 level will be the next obvious area of support. If we get there that simply means the market is in rally mode, a welcome sign for most investors.

Screenshot-2022-11-07-at-8.53.56-AM.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 November 7, 2022.

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 ETFARKK58.539.732.8
Proshares Bitcoin ETFBITO62.07.973.5
SPDR Dow JonesDIA21.947.465.1
iShares MSCI Emerging MarketsEEM28.45970.4
iShares MSCI EAFEEFA24.948.866.7
iShares MSCI Mexico ETFEWW26.531.883.1
iShares MSCI BrazilEWZ41.562.964.7
iShares China Large-CapFXI60.982.362.4
Vaneck Gold MinersGDX44.654.758.4
SPDR Gold GLD17.320.164.3
iShares High-YieldHYG15.549.148.5
iShares Russell 2000IWM29.243.854.1
SPDR Regional BankKRE27.923.258.1
Vaneck Oil ServicesOIH46.830.978.8
Invesco Nasdaq 100QQQ30.460.539.5
iShares Silver TrustSLV36.852.476.6
Vaneck SemiconductorSMH39.649.558.7
SPDR S&P 500 SPY 25.45249
iShares 20+ Treasury BondTLT22.848.732.3
United States Oil FundUSO46.144.973.4
Proshares Ultra VIX ShortUVXY93.94.422.8
CBOE Market Volatility IndexVIX76.610.214.6
Barclays S&P 500 VIX ETNVXX60.96.323
SPDR BiotechXLB26.073.566.4
SPDR Energy Select XLE35.335.973.4
SPDR FinancialsXLF25.62663.9
SPDR UtilitiesXLU25.058.962.8
SPDR S&P Oil & Gas ExplorerXOP45.019.369.8
SPDR Retail XRT38.949.948.5

Stock Watch List – Trade Ideas

Ticker Symbol IVIV Rank HPMR Oversold - Overbought
AppleAAPL38.765.233.6
Bank of AmericaBAC32.630.376.7
Bristol-Myers SquibbBMY22.317.985.5
CitigroupC33.727.752.5
CaterpillarCAT34.742.382.7
ComcastCMCSA36.339.248.8
CostcoCOST31.434.846.5
Cisco SystemsCSCO37.655.758.4
ChevronCVX31.438.976.3
DisneyDIS46.553.937.7
Duke EnergyDUK26.73962.1
FedexFDX35.035.650.8
Gilead SciencesGILD28.33580.7
General MotorsGM43.428.472.4
IntelINTC40.046.359.2
Johnson & JohnsonJNJ20.328.356.5
JP MorganJPM29.325.682.4
Coca-ColaKO22.634.859.5
Altria GroupMO25.92653.4
MerckMRK22.914.563.6
Morgan StanleyMS33.130.171.6
MicrosoftMSFT34.54639.7
Nextera EnergyNEE33.354.764.2
NvidiaNVDA63.239.471.5
PfizerPFE27.117.761.9
PaypalPYPL48.829.320.1
StarbucksSBUX35.852.669.3
AT&TT26.93170.6
VerizonVZ26.241.452.8
Walgreens Boots AllianceWBA30.829.175.4
Wells FargoWFC31.611.563.9
WalmartWMT29.357.365.1
Exxon MobilXOM32.831.374.6

Weekly Trade Discussion: Open Positions

*Portfolio updated every Monday

No positions at the moment.

The next Cabot Options Institute – Quant Trader issue will be published on November 14, 2022.

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.