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Quant Trader
Expert-Level Options for Sophisticated Traders

COI Quant Trader Issue: February 12, 2024

Volatility continues to remain low as a result of the seemingly never-ending market rally. While all of our bullish positions in our other Cabot Options Institute services (Fundamentals, Income Trader, Earnings Trader) continue to thrive in this environment, anything with a bearish-leaning or hedge-based trade has struggled. But as I’ve stated numerous times in the past, that’s why we always want to diversify our strategies when approaching the market.

The plan remains simple. I continue to focus on balancing out the overall deltas of our current positions by adding a trade, most likely a bull put spread. I’ll be concentrating on sector ETFs and individual stocks as the major indices continue to see low levels of volatility.

Weekly Commentary

Before I get started I wanted everyone to be aware that the next Quant Trader issue will go out next Tuesday (February 20) due to the upcoming market holiday on Monday.

Volatility continues to remain low as a result of the seemingly never-ending market rally. While all of our bullish positions in our other Cabot Options Institute services (Fundamentals, Income Trader, Earnings Trader) continue to thrive in this environment, anything with a bearish-leaning or hedge-based trade has struggled. But as I’ve stated numerous times in the past, that’s why we always want to diversify our strategies when approaching the market.

The plan remains simple. I continue to focus on balancing out the overall deltas of our current positions by adding a trade, most likely a bull put spread. I’ll be concentrating on sector ETFs and individual stocks as the major indices continue to see low levels of volatility.

As always, if you have any questions, please do not hesitate to email me at andy@cabotwealth.com.

Current Portfolio

Open DateTickerStrategyTradeOpen PriceCurrent PriceCurrent ProbabilityDelta
1/16/2024SPYIron CondorMarch 15, 2024 510/505 - 440/435 $0.66 $2.15 55.53% - 96.94%-0.12
1/23/2024QQQBear CallMarch 1, 2024 445/450 $0.60 $1.36 67.31%-0.11
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%
11/16/202211/28/2022IWMIron CondorDecember 16, 2022 205/200 - 162/157$0.75 $0.24 11.36%
11/10/202212/6/2022SPYBear Call SpreadDecember 16, 2022 420/425$0.65 $0.14 11.36%
12/1/202212/6/2022SPYBear Call SpreadJanuary 20, 2023 435/440$0.67 $0.18 10.86%
12/13/202212/15/2022SPYBear Call SpreadJanuary 20, 2023 430/435$0.54 $0.17 7.99%
12/7/20231/6/2023IWMIron CondorJanuary 20, 2023 202/198 - 160/156$0.70 $0.06 19.00%
1/4/20232/1/2023IWMIron CondorFebruary 17, 2023 200/195 - 154/149$0.65 $2.00 -27.00%
1/6/20232/2/2023SPYBear Call SpreadFebruary 17, 2023 415/420 $0.60 $2.50 -38.00%
2/2/20232/15/2023SPYBear Call SpreadMarch 17, 2023 440/445$0.63 $0.15 10.62%
2/10/20232/22/2023DIABear Call SpreadMarch 31, 2023 355/360$0.70 $0.17 11.86%
2/2/20233/1/2023IWMIron CondorMarch 17, 2023 175/180 - 215/220$0.72 $0.51 4.38%
3/6/20233/13/2023DIABear Call SpreadApril 21, 2023 350/355$0.85 $0.17 15.74%
2/23/20233/28/2023SPYIron CondorApril 21, 2023 435/430 - 350/345$0.80 $0.15 14.94%
3/23/20234/11/2023DIABear Call SpreadApril 21, 2023 338/443$0.62 $2.05 -28.60%
3/23/20234/19/2023IWMIron CondorMay 19, 2023 196/191 - 147/142$0.83 $0.23 13.64%
4/12/20234/21/2023DIABear Call SpreadMay 19, 2023 350/355$0.82 $0.44 8.23%
4/21/20235/2/2023SPYIron CondorJune 16, 2023 440/435 - 365/360$0.95 $0.63 6.84%
4/24/20235/10/2023DIABear Call SpreadJune 16, 2023 354/359$0.72 $0.22 11.11%
5/5/20235/24/023SPYBear Call SpreadJune 16, 2023 430/435$0.72 $0.35 7.99%
6/15/20236/22/2023SPYBear Call SpreadAugust 18, 2023 465/470$0.70 $0.24 10.13%
5/26/20236/23/2023IWMIron CondorJuly 21, 2023 191/196 - 156/151$0.79 $0.50 6.15%
5/31/20237/12/2023QQQBear Call SpreadJuly 21, 2023 375/380$0.60 $1.80 -31.60%
6/30/20238/7/2023SPYBear Call SpreadAugust 18, 2023 462/466$0.52 $0.23 7.82%
8/4/20238/11/2023SPYBear Call SpreadSeptember 15, 2023 470/475$0.65 $0.20 9.90%
8/17/20239/13/2023SPYIron CondorOctober 20, 2023 475/470 - 390/385$0.72 $0.25 10.38%
9/6/202310/11/2023IWMIron CondorOctober 20, 2023 204/199 - 169/164$0.62 $0.19 9.41%
* 9/29/202310/27/2023SPYBear Call SpreadNovember 17, 2023 452/457$0.74 $0.03 16.60%
*10/6/202311/3/2023SPYBull Put SpreadNovember 17, 2023 408/403$0.58 $0.03 12.36%
* 10/27/202311/3/2023SPYBear Call SpreadNovember 17, 2023 430/435$0.58 $3.50 -33.20%
10/31/202311/14/2023SPYIron CondorDecember 15, 2023 450/445 - 380/375$0.77 $3.00 -44.60%
11/6/202312/8/2023SPYBear Call SpreadDecember 15, 2023 456/461$0.58 $3.08 -50.00%
12/1/20231/10/2024SPYBear Call SpreadJanuary 19, 2024 475/480$0.75 $2.75 -40.00%
26.97%

Volatility Talk

We continue to be mired in the depths of low volatility. In fact, we are getting close to reaching two and a half months, or 72 days, of volatility readings, as seen through the VIX, where the investors fear gauge hasn’t pushed above 15. You have to go back to mid-October 2018 to witness such a stretch (66 days).

Now that we have reached 72 days below 15, the next area of focus is to see if the VIX can break its next longest streak of 115 days set back in early February 2018. The next notable level to watch would be a 115-day streak below 15 that ended on Feb. 1, 2018. Some of you may remember, a market-worrying episode known as “Volmageddon” took place a few days later, in February 2018. The event was created by the implosion of several short-volatility ETFs, triggering a more than 1,175-point drop in the Dow. At the time, this was the biggest daily point drop on record for the blue-chip gauge.

Now, while I don’t expect a similar near-term market-shaking event to occur, I do expect to see the VIX begin to rise over the next month or so, if not sooner.

As I’ve stated over the past few weeks and will state again, I do think implied volatility will increase going forward. In fact, we could be seeing some of the lowest levels of volatility for 2024. Since 1992, there have only been four years where the VIX has not pushed above 20. The long-term average, according to the CBOE, is 20. As I’ve written in the past few issues, I’m still looking at a variety of different volatility plays to take advantage of a potential pop in implied volatility over the next three to six months.

COI_QT_021224_VIX.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 February 12, 2024.

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

Very Overboughta reading greater than or equal to 80.0
Overboughtgreater than or equal to 60.0
Neutralbetween 40 to 60
Oversoldless than or equal 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

Exchange Traded FundTicker Symbol IVIV Rank HPMR Oversold - Overbought
ARK Innovation ETFARKK38.623.568.5
ProShares Bitcoin ETFBITO64.833.477.5
SPDR Dow JonesDIA11.59.864.7
iShares MSCI Emerging MarketsEEM15.511.866.5
iShares MSCI EAFEEFA12.612.656.9
iShares MSCI Mexico ETFEWW22.835.952.6
iShares MSCI BrazilEWZ24.530.746.2
iShares China Large-CapFXI30.839.251.9
VanEck Gold MinersGDX30.62933.6
SPDR Gold GLD11.16.443.6
iShares High-YieldHYG7.320.253.3
iShares Russell 2000IWM22.234.965.5
SPDR Regional BankKRE33.422.638
VanEck Oil ServicesOIH29.09.942.2
Invesco Nasdaq 100QQQ17.111.175.6
iShares Silver TrustSLV22.10.147.8
VanEck SemiconductorSMH30.054.680.7
SPDR S&P 500 SPY 12.98.877.1
iShares 20+ Treasury BondTLT15.213.639.4
United States Oil FundUSO31.527.763
ProShares Ultra VIX ShortUVXY93.215.135.3
CBOE Market Volatility IndexVIX82.236.741.2
Barclays S&P 500 VIX ETNVXX64.316.134.9
SPDR BiotechXLB14.312.854.4
SPDR Energy Select XLE20.33.148.4
SPDR FinancialsXLF14.53.364.5
SPDR UtilitiesXLU17.928.438.2
SPDR S&P Oil & Gas ExplorerXOP25.87.153.2
SPDR Retail XRT24.234.471.5

Stock Watch List – Trade Ideas

Stock - Quant TraderTicker Symbol IVIV Rank HPMR Oversold - Overbought
AppleAAPL20.217.150.5
Bank of AmericaBAC25.913.844.4
Bristol-Myers SquibbBMY23.145.158.6
CitigroupC25.79.344.1
CaterpillarCAT25.421.763.7
ComcastCMCSA27.333.231
CostcoCOST23.656.681.3
Cisco SystemsCSCO29.076.643.2
ChevronCVX20.814.754.4
DisneyDIS25.120.979.2
Duke EnergyDUK18.924.123.6
FedExFDX22.612.744.9
Gilead SciencesGILD29.723.019.3
General MotorsGM28.52.566.3
IntelINTC35.319.841.4
Johnson & JohnsonJNJ15.217.238.4
JPMorganJPM18.56.462
Coca-ColaKO17.942.242.2
Altria GroupMO16.716.140
MerckMRK16.80.962.1
Morgan StanleyMS23.714.536.8
MicrosoftMSFT20.02.174.6
NextEra EnergyNEE29.747.838.2
NvidiaNVDA57.067.084
PfizerPFE25.339.251.5
PayPalPYPL37.028.241.1
StarbucksSBUX20.519.675.1
AT&TT23.323.634.8
VerizonVZ19.315.729.5
Walgreens Boots AllianceWBA40.34939.8
Wells FargoWFC26.412.136.3
WalmartWMT23.76771.8
Exxon MobilXOM22.411.148.6

Weekly Trade Discussion: Open Positions

*Portfolio updated every Monday

Iron Condor: SPY March 15, 2024, 510/505 – 440/435

Original trade published on 1-16-2024 (click to see original alert)

Background: At the time of the trade, SPY was trading for roughly 474. We sold the March 15, 2024, SPY 510/505 – 440/435 iron condor for $0.66. The expected range or move was 455 to 494. The probability of success at the time of the trade was 91.07% on the call side and 86.77% on the put side.

Current Thoughts: The SPY now sits at 501.20. With just over a month left until the March 15 expiration, SPY sits uncomfortably close to our short call strike of 505.

Next week will be the telltale sign as to whether we need to adjust our position or not. Admittedly, I might adjust regardless of which direction the market decides to move early next week. If an adjustment does occur I will most likely buy back the put side of my iron condor and sell another bull put spread at higher strikes to bring in more premium and lower the risk on the trade. That being said, with so much time left until expiration, we have the benefit of taking several different avenues with the aforementioned adjustment being our preference.

Call Side:

COI_QT_021224_SPY_bearcall.png

Put Side:

COI_QT_021224_SPY_bullput.png

Bear Call: QQQ March 1, 2024, 445/450

Original trade published on 1-23-2024 (click to see original alert)

Background: At the time of the trade, QQQ was trading for roughly 422.16. We sold the March 1, 2024, QQQ 445/450 iron condor for $0.60. The expected range or move was 405 to 440. The probability of success at the time of the trade was 85.41% on the call side.

Current Thoughts: QQQ now sits slightly higher at 437.05. Our probability sits at 67.34% on the call side. There are 20 days left until our position is due to expire. If we see a move to the downside over the next week or so, we should be able to take off our trade for a nice return. If not, and QQQ continues to head higher, much like our SPY iron condor, we will need to make an adjustment.

Call Side:

COI_QT_021224_QQQ_bearcall.png

As always, if you have any questions, please feel free to email me at andy@cabotwealth.com.


The next Cabot Options Institute – Quant Trader issue will be

published on February 20, 2024.


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