We added another position to the mix, an iron condor in IWM, last week. And shortly after we added our range-bound iron condor, we decided to lock in profits on our SPY bear call spread, marking 10 out of 11 profitable trades since we initiated Quant Trader. Moreover, our holding period is only 17 days, far less (roughly 66% less) than if we were holding our trades through expiration.
My goal this week, if the market allows, is to add another bear call spread and bull put spread to the portfolio. My hope is that we can squeeze a bit more premium out of the October 21 expiration cycle, but we will have to see what is being offered.
Cabot Options Institute – Quant Trader Issue: September 19, 2022
We added another position to the mix, an iron condor in IWM, last week. And shortly after we added our range-bound iron condor, we decided to lock in profits on our SPY bear call spread, marking 10 out of 11 profitable trades since we initiated Quant Trader. Moreover, our holding period is only 17 days, far less (roughly 66% less) than if we were holding our trades through expiration.
My goal this week, if the market allows, is to add another bear call spread and bull put spread to the portfolio. My hope is that we can squeeze a bit more premium out of the October 21 expiration cycle, but we will have to see what is being offered.
Current Portfolio
Open Date | Ticker | Strategy | Trade | Open Price | Current Price | Current Probability | Delta |
9/13/2022 | IWM | Iron Condor | October 21, 2022 208/203 - 163/158 | $0.77 | $0.81 | 97.5% - 80.4% | 4 |
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% |
Volatility Talk
The VIX continues to float between 22 and 28. Even after a sharp decline that began Tuesday and didn’t let up until the closing bell Friday, the investor’s fear gauge couldn’t push past the 28 level, which has acted as a strong level of resistance since late August. Moreover, even after the sharp decline Friday the VIX also managed to push lower. Typically, if the S&P 500 moves lower, particularly sharply lower, the VIX moves in the opposite direction. Could this mean a short-term bounce is in the cards this week? Only time will tell but given that all of the major indices are also in a short-term oversold state a short-term pop could make an appearance. If so, I will certainly be adding a bear call spread or two.
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 September 19, 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 | 65.9 | 55.4 | 44.9 |
ProShares Bitcoin ETF | BITO | 82.4 | 23.8 | 41.4 |
SPDR Dow Jones | DIA | 23.5 | 44.4 | 29.1 |
iShares MSCI Emerging Markets | EEM | 22.9 | 26 | 32 |
iShares MSCI EAFE | EFA | 23.5 | 52.9 | 35.2 |
iShares MSCI Mexico ETF | EWW | 27.8 | 29.5 | 46.2 |
iShares MSCI Brazil | EWZ | 43.9 | 53.1 | 36.1 |
iShares China Large-Cap | FXI | 35.4 | 28.9 | 31.6 |
VanEck Gold Miners | GDX | 47.2 | 72.2 | 42.4 |
SPDR Gold | GLD | 18.5 | 22 | 31.7 |
iShares High-Yield | HYG | 17.2 | 47 | 36.9 |
iShares Russell 2000 | IWM | 30.6 | 54.1 | 34.1 |
SPDR Regional Bank | KRE | 30.3 | 30.8 | 46.5 |
VanEck Oil Services | OIH | 55.4 | 60.8 | 41.2 |
Invesco Nasdaq 100 | QQQ | 32.8 | 67.3 | 32.2 |
iShares Silver Trust | SLV | 34.5 | 36.6 | 61.5 |
VanEck Semiconductor | SMH | 42.1 | 59.6 | 33.9 |
SPDR S&P 500 | SPY | 26.9 | 54.1 | 30.8 |
iShares 20+ Treasury Bond | TLT | 22.3 | 42.7 | 30.2 |
United States Oil Fund | USO | 47.9 | 37.6 | 40.2 |
ProShares Ultra VIX Short | UVXY | 102.8 | 6.4 | 58.6 |
CBOE Market Volatility Index | VIX | 92.8 | 11.8 | 59.1 |
Barclays S&P 500 VIX ETN | VXX | 68.2 | 10.6 | 63.1 |
SPDR Biotech | XLB | 29.3 | 67.9 | 28.7 |
SPDR Energy Select | XLE | 42.1 | 59.5 | 41.4 |
SPDR Financials | XLF | 28.9 | 40.2 | 38.2 |
SPDR Utilities | XLU | 23.5 | 55.5 | 36.6 |
SPDR S&P Oil & Gas Explorer | XOP | 54.1 | 39 | 39.4 |
SPDR Retail | XRT | 42.4 | 60.6 | 35.9 |
Stock Watch List – Trade Ideas
Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought | |
Apple | AAPL | 38.6 | 55.9 | 33.4 |
Bank of America | BAC | 38.1 | 50.8 | 47.6 |
Bristol-Myers Squibb | BMY | 26.9 | 38.8 | 57.4 |
Citigroup | C | 40.2 | 49.3 | 32.7 |
Caterpillar | CAT | 38.9 | 63.2 | 34.1 |
Comcast | CMCSA | 40.1 | 53.9 | 43 |
Costco | COST | 35.6 | 48.4 | 28.8 |
Cisco Systems | CSCO | 29.7 | 24.3 | 29.4 |
Chevron | CVX | 37.2 | 54.9 | 41.6 |
Disney | DIS | 38.6 | 27 | 31.8 |
Duke Energy | DUK | 23.2 | 43.7 | 35.8 |
Fedex | FDX | 48.1 | 69.3 | 11.3 |
Gilead Sciences | GILD | 34.2 | 24 | 56.1 |
General Motors | GM | 45.2 | 40 | 48.3 |
Intel | INTC | 41.8 | 54.6 | 28 |
Johnson & Johnson | JNJ | 21.4 | 30.9 | 62.1 |
JP Morgan | JPM | 37.3 | 55.2 | 50.6 |
Coca-Cola | KO | 23.2 | 43.2 | 24.6 |
Altria Group | MO | 26.9 | 43.8 | 27.4 |
Merck | MRK | 25 | 17.5 | 53.2 |
Morgan Stanley | MS | 38.7 | 49.7 | 48.3 |
Microsoft | MSFT | 34.9 | 40.4 | 24.1 |
NextEra Energy | NEE | 32.2 | 59.4 | 30.2 |
Nvidia | NVDA | 59.8 | 40.7 | 31.1 |
Pfizer | PFE | 30.4 | 21.5 | 40 |
PayPal | PYPL | 53.3 | 37.2 | 44.4 |
Starbucks | SBUX | 34.3 | 34.6 | 63.7 |
AT&T | T | 31.3 | 74 | 31.8 |
Verizon | VZ | 29.1 | 87.3 | 37.4 |
Walgreens Boots Alliance | WBA | 41.6 | 86 | 26.9 |
Wells Fargo | WFC | 40.7 | 38 | 47.4 |
Walmart | WMT | 25.8 | 30.6 | 40.7 |
Exxon Mobil | XOM | 40 | 51.7 | 39.3 |
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 178.99 and our iron condor is worth $0.81. Our probability of success stands at 95.40% on the call side and 80.38% on the put side.
We just added the trade last week, so there isn’t much to discuss at the moment. So far, so good. Although, if we see a continuation of the sell-off from late last week and the delta of our 163 put strike hits 0.30 to 0.35, I will most likely go ahead and adjust the put side of our iron condor as well as lower the call strikes a bit to bring in additional premium.
Call Side:
Put Side:
The next Cabot Options Institute – Quant Trader issue will be published on September 26, 2022.
About the Analyst
Andy Crowder
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.