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Quant Trader
Expert-Level Options for Sophisticated Traders

COI Quant Trader Issue: February 5, 2024

Not much to say this week. 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.

Weekly Commentary

Not much to say this week. 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 Trades

Open DateTickerStrategyTradeOpen PriceCurrent PriceCurrent ProbabilityDelta
1/16/2024SPYIron CondorMarch 15, 2024 510/505 - 440/435 $0.66 $1.57 68.65% - 94.88%-0.11
1/23/2024QQQBear CallMarch 1, 2024 445/450 $0.60 $0.87 79.91%-0.07
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

Volatility picked up again last week, but still sits in “complacency” territory. What was interesting was the “fear gauge” didn’t push lower during the sharp rally to end the week. Typically, we would see the VIX significantly lower during such a rally, but that didn’t happen. In fact, the VIX held steady throughout the rally … a sign this rally could be nearing a short-term point of exhaustion.

As I stated over the past few weeks, 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 stated over 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_020524_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 5, 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 ETFARKK37.822.148.6
ProShares Bitcoin ETFBITO58.630.549
SPDR Dow JonesDIA12.013.471.9
iShares MSCI Emerging MarketsEEM15.713.548.8
iShares MSCI EAFEEFA15.319.854.6
iShares MSCI Mexico ETFEWW23.541.671.8
iShares MSCI BrazilEWZ24.131.837.5
iShares China Large-CapFXI32.250.832.6
VanEck Gold MinersGDX32.63344.7
SPDR Gold GLD12.416.952.2
iShares High-YieldHYG8.222.240.8
iShares Russell 2000IWM23.141.246.9
SPDR Regional BankKRE33.822.828.5
VanEck Oil ServicesOIH29.712.330.2
Invesco Nasdaq 100QQQ17.714.865.7
iShares Silver TrustSLV23.45.443.5
VanEck SemiconductorSMH27.437.366.7
SPDR S&P 500 SPY 13.713.569.8
iShares 20+ Treasury BondTLT16.724.953.1
United States Oil FundUSO33.638.433.4
ProShares Ultra VIX ShortUVXY96.328.951.9
CBOE Market Volatility IndexVIX84.247.255.3
Barclays S&P 500 VIX ETNVXX66.820.853.6
SPDR BiotechXLB14.210.152.2
SPDR Energy Select XLE21.27.755.7
SPDR FinancialsXLF15.37.669
SPDR UtilitiesXLU19.323.646.5
SPDR S&P Oil & Gas ExplorerXOP27.010.840.1
SPDR Retail XRT25.60.259.6

Stock Watch List – Trade Ideas

Stock - Quant TraderTicker Symbol IVIV Rank HPMR Oversold - Overbought
AppleAAPL22.028.837.8
Bank of AmericaBAC26.014.151
Bristol-Myers SquibbBMY23.955.425.3
CitigroupC25.810.863.5
CaterpillarCAT32.356.678.9
ComcastCMCSA22.013.648.8
CostcoCOST20.133.674.5
Cisco SystemsCSCO27.461.633
ChevronCVX21.518.371
DisneyDIS33.971.567.2
Duke EnergyDUK19.425.049.2
FedExFDX21.07.834
Gilead SciencesGILD29.158.723
General MotorsGM29.27.583.3
IntelINTC34.417.925.9
Johnson & JohnsonJNJ16.027.622.9
JPMorganJPM18.57.264.2
Coca-ColaKO16.936.360.7
Altria GroupMO17.216.961.5
MerckMRK16.70.186.3
Morgan StanleyMS22.911.046.3
MicrosoftMSFT20.13.968.7
NextEra EnergyNEE28.944.042.9
NvidiaNVDA49.244.984.8
PfizerPFE25.038.525.9
PayPalPYPL49.270.350.7
StarbucksSBUX19.719.747.2
AT&TT21.715.367.7
VerizonVZ20.316.362.4
Walgreens Boots AllianceWBA38.54543.2
Wells FargoWFC25.510.247.4
WalmartWMT23.365.782.6
Exxon MobilXOM22.513.854.5

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 it sits at 494.35. Admittedly, we are still early in the trade, but the probability sits at a somewhat precarious 69.22% on the call side and 94.82% on the put side. While there isn’t anything to do at the moment, a continued push to the upside and we will need to make an adjustment to our position.

Call Side:

COI_QT_020524_SPY_bearcall.png

Put Side:

COI_QT_020524_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 429.01. Our probability sits comfortably at 80.17% on the call side. There are 26 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. Until then, there isn’t much to do at the moment other than to allow time decay to work its magic.

Call Side:

COI_QT_020524_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 12, 2024.


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