Weekly Commentary
We finally locked in a profit last week in our QQQ bear call spread … and it looked like a similar fate was not far off for our SPY iron condor. That is until NVDA reported earnings and the market rocketed higher shortly after the announcement. The push higher in the S&P 500 led to SPY piercing our short call strike of 505. The spread is now worth $2.87. Given the near-term overbought readings and numerous short-term bearish indicators flashing red, I will continue to hold the position, but plan to exit if our spread hits $3.16.
I’ll be adding several more positions to the mix this week. Stay tuned!
As always, if you have any questions, please do not hesitate to email me at andy@cabotwealth.com.
Current Portfolio
| Open Date | Ticker | Strategy | Trade | Open Price | Current Price | Current Probability | Delta |
| 1/16/2024 | SPY | Iron Condor | March 15, 2024 510/505 - 440/435 | $0.66 | $2.87 | 42.31% - 98.30% | -0.14 |
| 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% |
| 9/13/2022 | 10/17/2022 | IWM | Iron Condor | October 21, 2022 208/203 - 163/158 | $0.77 | $0.30 | 10.40% |
| 10/3/2022 | 10/25/2022 | SPY | Bull Put Spread | November 18, 2022 325/320 | $0.54 | $0.09 | 9.89% |
| 10/4/2022 | 11/2/2022 | IWM | Iron Condor | November 18, 2022 198/203 - 143/138 | $0.64 | $0.32 | 6.84% |
| 10/6/2022 | 11/2/2022 | SPY | Bear Call Spread | November 18, 2022 412/416 | $0.43 | $0.28 | 3.90% |
| 11/16/2022 | 11/28/2022 | IWM | Iron Condor | December 16, 2022 205/200 - 162/157 | $0.75 | $0.24 | 11.36% |
| 11/10/2022 | 12/6/2022 | SPY | Bear Call Spread | December 16, 2022 420/425 | $0.65 | $0.14 | 11.36% |
| 12/1/2022 | 12/6/2022 | SPY | Bear Call Spread | January 20, 2023 435/440 | $0.67 | $0.18 | 10.86% |
| 12/13/2022 | 12/15/2022 | SPY | Bear Call Spread | January 20, 2023 430/435 | $0.54 | $0.17 | 7.99% |
| 12/7/2023 | 1/6/2023 | IWM | Iron Condor | January 20, 2023 202/198 - 160/156 | $0.70 | $0.06 | 19.00% |
| 1/4/2023 | 2/1/2023 | IWM | Iron Condor | February 17, 2023 200/195 - 154/149 | $0.65 | $2.00 | -27.00% |
| 1/6/2023 | 2/2/2023 | SPY | Bear Call Spread | February 17, 2023 415/420 | $0.60 | $2.50 | -38.00% |
| 2/2/2023 | 2/15/2023 | SPY | Bear Call Spread | March 17, 2023 440/445 | $0.63 | $0.15 | 10.62% |
| 2/10/2023 | 2/22/2023 | DIA | Bear Call Spread | March 31, 2023 355/360 | $0.70 | $0.17 | 11.86% |
| 2/2/2023 | 3/1/2023 | IWM | Iron Condor | March 17, 2023 175/180 - 215/220 | $0.72 | $0.51 | 4.38% |
| 3/6/2023 | 3/13/2023 | DIA | Bear Call Spread | April 21, 2023 350/355 | $0.85 | $0.17 | 15.74% |
| 2/23/2023 | 3/28/2023 | SPY | Iron Condor | April 21, 2023 435/430 - 350/345 | $0.80 | $0.15 | 14.94% |
| 3/23/2023 | 4/11/2023 | DIA | Bear Call Spread | April 21, 2023 338/443 | $0.62 | $2.05 | -28.60% |
| 3/23/2023 | 4/19/2023 | IWM | Iron Condor | May 19, 2023 196/191 - 147/142 | $0.83 | $0.23 | 13.64% |
| 4/12/2023 | 4/21/2023 | DIA | Bear Call Spread | May 19, 2023 350/355 | $0.82 | $0.44 | 8.23% |
| 4/21/2023 | 5/2/2023 | SPY | Iron Condor | June 16, 2023 440/435 - 365/360 | $0.95 | $0.63 | 6.84% |
| 4/24/2023 | 5/10/2023 | DIA | Bear Call Spread | June 16, 2023 354/359 | $0.72 | $0.22 | 11.11% |
| 5/5/2023 | 5/24/023 | SPY | Bear Call Spread | June 16, 2023 430/435 | $0.72 | $0.35 | 7.99% |
| 6/15/2023 | 6/22/2023 | SPY | Bear Call Spread | August 18, 2023 465/470 | $0.70 | $0.24 | 10.13% |
| 5/26/2023 | 6/23/2023 | IWM | Iron Condor | July 21, 2023 191/196 - 156/151 | $0.79 | $0.50 | 6.15% |
| 5/31/2023 | 7/12/2023 | QQQ | Bear Call Spread | July 21, 2023 375/380 | $0.60 | $1.80 | -31.60% |
| 6/30/2023 | 8/7/2023 | SPY | Bear Call Spread | August 18, 2023 462/466 | $0.52 | $0.23 | 7.82% |
| 8/4/2023 | 8/11/2023 | SPY | Bear Call Spread | September 15, 2023 470/475 | $0.65 | $0.20 | 9.90% |
| 8/17/2023 | 9/13/2023 | SPY | Iron Condor | October 20, 2023 475/470 - 390/385 | $0.72 | $0.25 | 10.38% |
| 9/6/2023 | 10/11/2023 | IWM | Iron Condor | October 20, 2023 204/199 - 169/164 | $0.62 | $0.19 | 9.41% |
| * 9/29/2023 | 10/27/2023 | SPY | Bear Call Spread | November 17, 2023 452/457 | $0.74 | $0.03 | 16.60% |
| *10/6/2023 | 11/3/2023 | SPY | Bull Put Spread | November 17, 2023 408/403 | $0.58 | $0.03 | 12.36% |
| * 10/27/2023 | 11/3/2023 | SPY | Bear Call Spread | November 17, 2023 430/435 | $0.58 | $3.50 | -33.20% |
| 10/31/2023 | 11/14/2023 | SPY | Iron Condor | December 15, 2023 450/445 - 380/375 | $0.77 | $3.00 | -44.60% |
| 11/6/2023 | 12/8/2023 | SPY | Bear Call Spread | December 15, 2023 456/461 | $0.58 | $3.08 | -50.00% |
| 12/1/2023 | 1/10/2024 | SPY | Bear Call Spread | January 19, 2024 475/480 | $0.75 | $2.75 | -40.00% |
| 1/23/2024 | 2/21/2024 | QQQ | Bear Call Spread | March 1, 2024 445/450 | $0.60 | $0.20 | 8.70% |
Volatility Talk
After the VIX pushed through 15 and actually held (for one day), some market participants, including myself, thought we might have a chance at moving back to normal levels, around 20. However, NVDA’s earnings announcement squashed that idea, at least for the time being. Until we see the VIX push above 15 and work its way to the 20 level, trading opportunities, particularly in the major market indices (SPY), will be more challenging. Until then, we will need to look elsewhere for the “normal” levels of implied volatility we prefer.
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 26, 2024.
Here are the various levels I use to determine if an ETF is in an oversold or overbought state.
| Very Overbought | a reading greater than or equal to 80.0 |
| Overbought | greater than or equal to 60.0 |
| Neutral | between 40 to 60 |
| Oversold | less than or equal 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
| Exchange Traded Fund | Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought |
| ARK Innovation ETF | ARKK | 43.3 | 26.4 | 48.6 |
| ProShares Bitcoin ETF | BITO | 63.6 | 40.1 | 62.5 |
| SPDR Dow Jones | DIA | 13.6 | 18.4 | 69.2 |
| iShares MSCI Emerging Markets | EEM | 16.6 | 8.6 | 74.5 |
| iShares MSCI EAFE | EFA | 14.7 | 9.8 | 77.5 |
| iShares MSCI Mexico ETF | EWW | 23.4 | 40.3 | 37.8 |
| iShares MSCI Brazil | EWZ | 24.5 | 24.8 | 48.5 |
| iShares China Large-Cap | FXI | 33.8 | 49.7 | 74.2 |
| VanEck Gold Miners | GDX | 36.5 | 42.1 | 45.2 |
| SPDR Gold | GLD | 11.8 | 28.1 | 64.8 |
| iShares High-Yield | HYG | 8.2 | 2.2 | 58.1 |
| iShares Russell 2000 | IWM | 26.5 | 39.8 | 54.1 |
| SPDR Regional Bank | KRE | 36.3 | 17.8 | 43.6 |
| VanEck Oil Services | OIH | 29.8 | 5.5 | 63.1 |
| Invesco Nasdaq 100 | QQQ | 20.3 | 13.1 | 61.4 |
| iShares Silver Trust | SLV | 24.5 | 12.5 | 54.5 |
| VanEck Semiconductor | SMH | 33.9 | 43.6 | 68.3 |
| SPDR S&P 500 | SPY | 15.4 | 11.6 | 71.5 |
| iShares 20+ Treasury Bond | TLT | 15.6 | 10.6 | 54.8 |
| United States Oil Fund | USO | 34.4 | 24.2 | 48.9 |
| ProShares Ultra VIX Short | UVXY | 102.8 | 14.4 | 36 |
| CBOE Market Volatility Index | VIX | 86.2 | 42.7 | 43.8 |
| Barclays S&P 500 VIX ETN | VXX | 71.9 | 19.6 | 36.5 |
| SPDR Biotech | XLB | 16.3 | 10.1 | 77.2 |
| SPDR Energy Select | XLE | 21.9 | 1.6 | 61.5 |
| SPDR Financials | XLF | 16.8 | 9.1 | 76 |
| SPDR Utilities | XLU | 22.1 | 17.6 | 61.7 |
| SPDR S&P Oil & Gas Explorer | XOP | 26.9 | 6 | 63 |
| SPDR Retail | XRT | 32.3 | 31.3 | 68 |
Stock Watch List – Trade Ideas
| Stock - Quant Trader | Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought |
| Apple | AAPL | 23.8 | 21.0 | 37 |
| Bank of America | BAC | 27.4 | 11.0 | 58.5 |
| Bristol-Myers Squibb | BMY | 23.9 | 53.6 | 77.1 |
| Citigroup | C | 26.4 | 3.4 | 66.4 |
| Caterpillar | CAT | 27.5 | 15.8 | 62.4 |
| Comcast | CMCSA | 29.0 | 26.6 | 40.4 |
| Costco | COST | 24.9 | 52.3 | 78.6 |
| Cisco Systems | CSCO | 18.7 | 11.8 | 40.6 |
| Chevron | CVX | 21.4 | 9.7 | 61.7 |
| Disney | DIS | 24.4 | 11.7 | 55.3 |
| Duke Energy | DUK | 19.6 | 15.9 | 47.8 |
| FedEx | FDX | 32.7 | 34.1 | 59 |
| Gilead Sciences | GILD | 24.3 | 28.4 | 44.9 |
| General Motors | GM | 30.2 | 3.4 | 68.1 |
| Intel | INTC | 40.2 | 12.5 | 40.8 |
| Johnson & Johnson | JNJ | 17.9 | 17.7 | 71.9 |
| JPMorgan | JPM | 20.2 | 9.6 | 83.4 |
| Coca-Cola | KO | 13.8 | 10.7 | 74 |
| Altria Group | MO | 19.9 | 16.4 | 68.8 |
| Merck | MRK | 19.2 | 7.2 | 80.9 |
| Morgan Stanley | MS | 26.0 | 11.0 | 56.8 |
| Microsoft | MSFT | 22.7 | 3.8 | 56.2 |
| NextEra Energy | NEE | 31.5 | 46.6 | 47.9 |
| Nvidia | NVDA | 67.3 | 44.5 | 73.8 |
| Pfizer | PFE | 26.9 | 40.2 | 59.3 |
| PayPal | PYPL | 36.8 | 20.5 | 48.5 |
| Starbucks | SBUX | 21.4 | 21.2 | 61.3 |
| AT&T | T | 22.7 | 18.5 | 42.3 |
| Verizon | VZ | 20.0 | 16.6 | 50.1 |
| Walgreens Boots Alliance | WBA | 41.9 | 63.8 | 42 |
| Wells Fargo | WFC | 27.3 | 7.9 | 81.7 |
| Walmart | WMT | 18 | 22.3 | 73.7 |
| Exxon Mobil | XOM | 23 | 6.3 | 55.2 |
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 507.85. With just 18 days left until the March 15 expiration, SPY sits above our short call strike of 505. There is no doubt our position is in a precarious position as any follow-through to last week’s bullishness will certainly lead to taking a loss. If we expect to take a profit off the table a near-term decline needs to occur. As I write this, S&P futures are down 12.25 and SPY is trading around 506.89 after hours … certainly a move in the right direction.
Call Side:
Put Side:
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 March 4, 2024.
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