Since our last issue the market has pulled back sharply. No worries, as our portfolio was leaning bearish so the pullback gave us the opportunity to take off two of our bear call spreads. We took off both our SPY and DIA bear call spreads for returns of 14.42% and 15.47%, respectively.
Now we are left with our iron condor in IWM which I hope to take off for a small profit over the next week or so. But I also want to ramp up our positions again with implied volatility once again popping off near-term lows and now hovering above 25.

Cabot Options Institute – Quant Trader Issue: September 2, 2022

Before I get to this week’s issue, I wanted to let everyone know that starting September 12 our weekly issues will be released on Mondays instead of Fridays. This should allow me to give all of you more thorough weekly reviews and prep heading into the following week. As always, if you have any questions, comments or feedback, please do not hesitate to email me at andy@cabotwealth.com.

Since our last issue the market has pulled back sharply. No worries, as our portfolio was leaning bearish so the pullback gave us the opportunity to take off two of our bear call spreads. We took off both our SPY and DIA bear call spreads for returns of 14.42% and 15.47%, respectively.

Now we are left with our iron condor in IWM which I hope to take off for a small profit over the next week or so. But I also want to ramp up our positions again with implied volatility once again popping off near-term lows and now hovering above 25. My hope is that by early next week we will have several bear call spreads on and a few bull put spreads on as well. I also want to add another iron condor in one of the major indexes.

Current Portfolio

Volatility Talk
The pullback that started last Friday pushed the VIX towards 28, before the investor’s fear gauge pulled back later in the week. With the VIX hovering above 25, as stated before, I plan on taking advantage of the near-term pop in volatility by selling premium using several different options strategies. Be prepared to see several trade alerts over the next few trading days as I want to start selling premium for the October expiration cycle.

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 5, 2022.

Here are the various levels I use to determine if an ETF is in an oversold or overbought state.

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

Stock Watch List- Trade Ideas

Weekly Trade Discussion: Open Positions

Iron Condor: IWM September 23, 2022, 220/215 calls – 173/168 puts
Original trade published on 8-11-2022 (click to see original alert)

Background: At the time of the trade, IWM was trading for 197.66. We sold the September 23, 2022, IWM 220/215 – 173/168 iron condor spread for $0.77 with an 88.09% (upside) to 88.06% (downside) probability of success. The probability of touch was 24.01% (upside) to 23.41% (downside). The expected range was 186 to 209.

Current Thoughts: IWM is currently trading for 181.50 and our iron condor spread is worth $0.96. Our probability of success stands at 99.46% on the call side and 71.81% on the put side. As it stands, we are in good shape, even if the price of our iron condor is slightly above where we sold it back on August 11. If we can stay around this area over the next week or see a slight bump higher, I will take the trade off the table, even if it is only for a small profit.

Call Side:

Put Side:

The next Cabot Options Institute – Quant Trader issue will be published on September 12, 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.