I’m going to keep the intro short today as we have an upcoming subscriber-only webinar this week when I plan to touch on the current state of the market, our current trades, and some potential upcoming trades. If you wish to attend or receive the recording of the webinar, please click here to sign up.
Current Portfolio
Open Trades | |||||||
Open Date | Ticker | Strategy | Trade | Open Price | Current Price | Current Probability | Delta |
9/13/22 | IWM | Iron Condor | October 21, 2022 208/203 – 163/158 | $0.77 | $1.01 | 99.66% – 68.27% | 17 |
10/3/22 | SPY | Bull Put | November 18, 2022 325/320 | $0.54 | $0.63 | 81.58% | 3 |
10/4/22 | IWM | Iron Condor | November 18, 2022 198/203 – 143/138 | $0.64 | $0.55 | 95.67% – 86.57% | 0 |
10/6/22 | SPY | Bear Call | November 18, 2022 412/416 | $0.43 | $0.19 | 95.01% | -1 |
Closed Trades | |||||||
Open Date | Closed Date | Ticker | Strategy | Trade | Open Price | Closing Price | Return |
6/2/22 | 6/13/22 | SPY | Bear Call Spread | July 15, 2022 440/445 | $0.70 | $0.05 | 14.94% |
6/8/22 | 6/17/22 | XOP | Bear Call Spread | July 15, 2022 190/195 | $0.70 | $0.04 | 15.21% |
6/22/22 | 7/13/22 | SPY | Bear Call Spread | July 29, 2022 405/410 | $0.75 | $0.35 | 8.70% |
6/30/22 | 7/25/22 | IWM | Iron Condor | August 19, 2022 195/200 – 145/140 | $0.70 | $0.34 | 7.76% |
7/8/22 | 7/28/22 | GLD | Bull Put Spread | August 19, 2022 155/150 | $0.60 | $0.16 | 9.65% |
7/14/22 | 8/11/22 | SPY | Iron Condor | August 19, 2022 417/412 – 335/330 | $0.70 | $4.10 | ###### |
8/1/22 | 8/29/22 | SPY | Bear Call Spread | September 16, 2022 439/444 | $0.70 | $0.07 | 14.42% |
8/11/22 | 8/29/22 | DIA | Bear Call Spread | September 23, 2022 350/325 | $0.75 | $0.08 | 15.47% |
8/11/22 | 9/8/22 | IWM | Iron Condor | September 23, 2022 220/215 – 173/168 | $0.77 | $0.57 | 4.17% |
9/7/22 | 9/9/22 | QQQ | Bull Put Spread | October 21, 2022 260/255 | $0.62 | $0.30 | 6.84% |
9/9/22 | 9/15/22 | SPY | Bear Call Spread | October 21, 2022 430/435 | $0.75 | $0.25 | 11.11% |
Volatility Talk
The song remains the same.
The VIX continues to trade in a range between 34 and 28. Early last week it looked like there was a good chance the VIX would break above the 34 area, but the bulls stepped in on Thursday with a big rally and pushed the market higher. The short-term bullishness didn’t last long, however, as the bears stepped back in on Friday and pushed the market back down towards near-term lows in the S&P 500. As I have stated for weeks now, keep an eye on that 28-35 range to see who wins this short-term tug of war between the bulls and bears. It could be the direction we are headed as we close out a memorable 2022.
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 October 17, 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 | 72.7 | 65.2 | 24.5 |
Proshares Bitcoin ETF | BITO | 73.7 | 18.6 | 42.9 |
iShares MSCI Emerging Markets | EEM | 30.3 | 57.1 | 25.3 |
iShares MSCI EAFE | EFA | 28.6 | 52 | 39.8 |
iShares MSCI Mexico ETF | EWW | 49.2 | 68.1 | 44.5 |
iShares MSCI Brazil | EWZ | 49.7 | 47.8 | 36.9 |
iShares China Large-Cap | FXI | 54.8 | 70.1 | 18.2 |
Vaneck Gold Miners | GDX | 20.3 | 31.8 | 30.8 |
SPDR Gold | GLD | 19.5 | 70.9 | 31.6 |
iShares High-Yield | HYG | 37.1 | 52.1 | 39.3 |
SPDR Regional Bank | KRE | 39.7 | 58.7 | 53.8 |
iShares Silver Trust | SLV | 28.9 | 85.7 | 27.2 |
iShares 20+ Treasury Bond | TLT | 50.1 | 37 | 25.9 |
United States Oil Fund | USO | 118.5 | 18.8 | 46.5 |
Proshares Ultra VIX Short | UVXY | 83 | 25.8 | 61.3 |
Barclays S&P 500 VIX ETN | VXX | 35.5 | 66 | 61 |
SPDR Biotech | XLB | 46.8 | 74.7 | 39.1 |
SPDR Energy Select | XLE | 35.1 | 64.2 | 54.3 |
SPDR Financials | XLF | 32.7 | 79.8 | 47.3 |
SPDR Utilities | XLU | 47.6 | 70.6 | 28.8 |
SPDR Retail | XRT | 31.2 | 51.4 | 37.7 |
Stock Watch List – Trade Ideas
Ticker Symbol | IV | IV Rank | HPMR Oversold – Overbought | |
Bank of America | BAC | 45.4 | 66.6 | 55.9 |
Bristol-Myers | BMY | 30.5 | 60.3 | 53.6 |
Citigroup | C | 45.7 | 63.8 | 53.1 |
Costco | COST | 37.5 | 51.5 | 27.6 |
Cisco Systems | CSCO | 37.7 | 67 | 43.5 |
CVS Health | CVS | 37.7 | 74.6 | 32.4 |
Dow Inc. | DOW | 44.8 | 70.5 | 50.1 |
Duke Energy | DUK | 37.3 | 74.8 | 27.4 |
Ford | F | 67.8 | 78.7 | 39.9 |
Gilead Sciences | GILD | 36.2 | 56.7 | 63.5 |
General Motors | GM | 61 | 87 | 40 |
Intel | INTC | 62.8 | 91.5 | 42.3 |
Johnson & Johnson | JNJ | 25.7 | 68.1 | 55.1 |
Coca-Cola | KO | 30.8 | 78.9 | 37 |
Altria Group | MO | 34.8 | 80.2 | 69.7 |
Merck | MRK | 28.8 | 29.8 | 73.2 |
Marvell Tech. | MRVL | 69.4 | 70.8 | 26.4 |
Morgan Stanley | MS | 43.8 | 65.8 | 31.9 |
Micron | MU | 57.2 | 63.6 | 48.9 |
Oracle | ORCL | 36.2 | 43.6 | 48.8 |
Pfizer | PFE | 36.9 | 54.6 | 44.4 |
Paypal | PYPL | 73.1 | 72.1 | 28.1 |
Starbucks | SBUX | 47.6 | 90 | 45.1 |
AT&T | T | 39.9 | 88.1 | 38.6 |
Verizon | VZ | 38.4 | 88 | 33 |
Walgreens Boots Alliance | WBA | 40.3 | 51.2 | 55 |
Wells Fargo | WFC | 43.8 | 46.4 | 62.5 |
Walmart | WMT | 33 | 86.2 | 44.5 |
Exxon-Mobil | XOM | 44.9 | 72.5 | 57.9 |
Weekly Trade Discussion: Open Positions
*Portfolio updated every Monday
Iron Condor: IWM October 21, 2022, 203/208 calls – 163/158 puts
Original trade published on 9-13-2022 (click to see original alert)
Background: At the time of the trade, IWM was trading for 183.51. We sold the October 21, 2022, IWM 203/208 – 163/158 iron condor for $0.77 with a 90.93% (upside) and 85.20% (downside) probability of success. The expected range was 171 to 196.
Current Thoughts: IWM is currently trading for 166.81, and our iron condor is worth $1.00. Our probability of success stands at 99.87% on the call side and 69.93% on the put side.
With 5 days left and IWM still testing our short put strike of 163, there is still a good chance we will hit the stop-loss ($2.00) that I established with my alert that went out a few weeks ago. Our iron condor currently stands at $1.00, but a continuation of the current trend lower would certainly trigger my mental stop-loss of $2.00 and convince me to take off the trade for a small loss. That being said, a short-term bounce should give us an opportunity to take the trade off the table for a decent profit.
As I stated in the stop-loss alert that went out a few weeks ago, we have managed to outperform all indices by a nice margin, and I want to keep it that way by not allowing losses to get out of hand. Remember, losses will occur; it’s how we manage them over the long term that separates success from failure. It’s that simple. We’re never going to take 100% losses, and, in most cases, we will never even get close to that percentage.
Call Side:
Put Side:
Bull Put: SPY November 18, 2022, 325/320 puts
Original trade published on 10-3-2022 (click to see original alert)
Background: At the time of the trade, SPY was trading for 364. We sold the November 18, 2022, SPY 325/320 bull put spread for $0.54 with an 82.33% (downside) probability of success. The expected range was 337 to 392.
Current Thoughts: SPY is currently trading for 357.63 and our bull put is worth $0.62. Our probability of success stands at 81.79% and the probability of touch is 35.63%.
With 33 days left, we are in good shape as we have almost 33 points of cushion to the downside, or 9.2%.
Iron Condor: IWM November 18, 2022, 198/203 calls – 143/138 putsOriginal trade published on 10-4-2022 (click to see original alert)
Background: At the time of the trade, IWM was trading for 174.86. We sold the November 18, 2022, IWM 198/203 – 143/138 iron condor for $0.64 with a 90.48% (upside) and 90.49% (downside) probability of success. The expected range was 160 to 190.
Current Thoughts: IWM is currently trading for 166.81, and our iron condor is worth $0.44. Our probability of success stands at 97.03% on the call side and 88.36% on the put side.
With 33 days left until expiration, our November IWM iron condor is in great shape at the moment. Our probabilities of success, on both sides, remain incredibly high and if IWM manages to stay around this area over the next week or so we should have the opportunity to take off our trade early for a nice profit.
Call Side:
Put Side:
Bear Call: SPY November 18, 2022, 412/416 callsOriginal trade published on 10-6-2022 (click to see original alert)
Background: At the time of the trade, SPY was trading for 374.50. We sold the November 18, 2022, SPY 412/416 bear call for $0.43 with an 89.44% probability of success. The expected range was 348 to 401.
Current Thoughts: SPY is currently trading for 357.63 and our bear call is worth $0.12. Our probability of success stands at 96.22% and the probability of touch is 7.64%.
With 33 days left, our SPY bear call spread is in good shape. So good that more than likely I will take off the trade this week, lock in some decent profits and move on to the next opportunity.
The next Cabot Options Institute – Quant Trader issue will be published on October 24, 2022.