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Quant Trader
Expert-Level Options for Sophisticated Traders

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.

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 DateTickerStrategyTradeOpen PriceCurrent PriceCurrent ProbabilityDelta
9/13/2022IWMIron CondorOctober 21, 2022 208/203 - 163/158$0.77$0.8197.5% - 80.4%4
Closed Trades
Open DateClosed DateTickerStrategy TradeOpen PriceClosing PriceReturn
6/2/20226/13/2022SPYBear Call SpreadJuly 15, 2022 440/445$0.70$0.0514.94%
6/8/20226/17/2022XOPBear Call SpreadJuly 15, 2022 190/195$0.70$0.0415.21%
6/22/20227/13/2022SPYBear Call SpreadJuly 29, 2022 405/410$0.75$0.358.70%
6/30/20227/25/2022IWMIron CondorAugust 19, 2022 195/200 - 145/140$0.70$0.347.76%
7/8/20227/28/2022GLDBull Put SpreadAugust 19, 2022 155/150$0.60$0.169.65%
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$0.0714.42%
8/11/20228/29/2022DIABear Call SpreadSeptember 23, 2022 350/325$0.75$0.0815.47%
8/11/20229/8/2022IWMIron CondorSeptember 23, 2022 220/215 - 173/168$0.77$0.574.17%
9/7/20229/9/2022QQQBull Put SpreadOctober 21, 2022 260/255$0.62$0.306.84%
9/9/20229/15/2022SPYBear Call SpreadOctober 21, 2022 430/435$0.75$0.2511.11%

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.

COI_QT_091922_VIX

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 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 ETFARKK65.955.444.9
ProShares Bitcoin ETFBITO82.423.841.4
SPDR Dow JonesDIA23.544.429.1
iShares MSCI Emerging MarketsEEM22.92632
iShares MSCI EAFEEFA23.552.935.2
iShares MSCI Mexico ETFEWW27.829.546.2
iShares MSCI BrazilEWZ43.953.136.1
iShares China Large-CapFXI35.428.931.6
VanEck Gold MinersGDX47.272.242.4
SPDR GoldGLD18.52231.7
iShares High-YieldHYG17.24736.9
iShares Russell 2000IWM30.654.134.1
SPDR Regional BankKRE30.330.846.5
VanEck Oil ServicesOIH55.460.841.2
Invesco Nasdaq 100QQQ32.867.332.2
iShares Silver TrustSLV34.536.661.5
VanEck SemiconductorSMH42.159.633.9
SPDR S&P 500SPY26.954.130.8
iShares 20+ Treasury BondTLT22.342.730.2
United States Oil FundUSO47.937.640.2
ProShares Ultra VIX ShortUVXY102.86.458.6
CBOE Market Volatility IndexVIX92.811.859.1
Barclays S&P 500 VIX ETNVXX68.210.663.1
SPDR BiotechXLB29.367.928.7
SPDR Energy SelectXLE42.159.541.4
SPDR FinancialsXLF28.940.238.2
SPDR UtilitiesXLU23.555.536.6
SPDR S&P Oil & Gas ExplorerXOP54.13939.4
SPDR RetailXRT42.460.635.9

Stock Watch List – Trade Ideas

Ticker Symbol IVIV Rank HPMR Oversold - Overbought
AppleAAPL38.655.933.4
Bank of AmericaBAC38.150.847.6
Bristol-Myers SquibbBMY26.938.857.4
CitigroupC40.249.332.7
CaterpillarCAT38.963.234.1
ComcastCMCSA40.153.943
CostcoCOST35.648.428.8
Cisco SystemsCSCO29.724.329.4
ChevronCVX37.254.941.6
DisneyDIS38.62731.8
Duke EnergyDUK23.243.735.8
FedexFDX48.169.311.3
Gilead SciencesGILD34.22456.1
General MotorsGM45.24048.3
IntelINTC41.854.628
Johnson & JohnsonJNJ21.430.962.1
JP MorganJPM37.355.250.6
Coca-ColaKO23.243.224.6
Altria GroupMO26.943.827.4
MerckMRK2517.553.2
Morgan StanleyMS38.749.748.3
MicrosoftMSFT34.940.424.1
NextEra EnergyNEE32.259.430.2
NvidiaNVDA59.840.731.1
PfizerPFE30.421.540
PayPalPYPL53.337.244.4
StarbucksSBUX34.334.663.7
AT&TT31.37431.8
VerizonVZ29.187.337.4
Walgreens Boots AllianceWBA41.68626.9
Wells FargoWFC40.73847.4
WalmartWMT25.830.640.7
Exxon MobilXOM4051.739.3

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:

COI_QT_091922_IWM_bearcall

Put Side:

COI_QT_091922_IWM_bullput


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.