Weekly Commentary
We are completely flat at the moment.
Volatility continues to float between a fairly tight range of 12 to 14 which makes it challenging to sell premium, at least in the major indices. If we see a push to 15 or higher, I’ll most likely add a premium selling play in SPY. Until then, my focus is sector ETFs and individual stocks. I’m leaning more towards the former at the moment with earnings season upon us. But I’m definitely looking to sell premium shortly after a few key announcements in some of the big blue-chip stocks over the next few weeks in Microsoft (MFST), Visa (V) and a few others.
My goal is to ramp up the portfolio with an iron condor, bull put spread and bear call spread all of which, at least initially, create a delta-neutral portfolio. Basically, we don’t want to lean too heavily towards the bullish or bearish side of things. I’m also still looking at a few volatility plays just in case we see a pop in volatility over the next few months.
As always, if you have any questions, please do not hesitate to email me at andy@cabotwealth.com.
Current Portfolio
Open Trades | |||||||
| Open Date | Ticker | Strategy | Trade | Open Price | Current Price | Current Probability | Delta |
| 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% |
Volatility Talk
Even with the pullback last week, complacency continues to dominate the psyche of market participants. Again, this is clearly seen through the “performance” of the volatility index, or VIX.
However, the pullback has increased the implied volatility in quite a few high-options-volume, blue-chip stocks so opportunities are once again rearing their head … thankfully. It would still be nice to see the volatility in SPY and all of the other major indexes we follow (DIA, QQQ, IWM, etc.) push to slightly elevated levels. Although, I’ll take just “normal” levels of volatility at this point.
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 January 16, 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 | 39.7 | 29.3 | 29.1 |
| ProShares Bitcoin ETF | BITO | 68.5 | 59.3 | 41.8 |
| SPDR Dow Jones | DIA | 11.6 | 10 | 54.9 |
| iShares MSCI Emerging Markets | EEM | 16.3 | 17.8 | 43.9 |
| iShares MSCI EAFE | EFA | 13.2 | 13.4 | 59.5 |
| iShares MSCI Mexico ETF | EWW | 24.0 | 46.6 | 49.8 |
| iShares MSCI Brazil | EWZ | 25.3 | 1.1 | 49.4 |
| iShares China Large-Cap | FXI | 29.0 | 26.3 | 39.2 |
| VanEck Gold Miners | GDX | 30.9 | 33.8 | 45.9 |
| SPDR Gold | GLD | 13.2 | 24.1 | 57.6 |
| iShares High-Yield | HYG | 8.8 | 18.6 | 68.9 |
| iShares Russell 2000 | IWM | 9.7 | 29.7 | 38.1 |
| SPDR Regional Bank | KRE | 31.2 | 18.7 | 35.1 |
| VanEck Oil Services | OIH | 31.2 | 17.9 | 35.7 |
| Invesco Nasdaq 100 | QQQ | 16.9 | 9.6 | 65.3 |
| iShares Silver Trust | SLV | 26.2 | 22.8 | 45 |
| VanEck Semiconductor | SMH | 25.3 | 25.3 | 58.6 |
| SPDR S&P 500 | SPY | 12.5 | 6.6 | 65.1 |
| iShares 20+ Treasury Bond | TLT | 14.9 | 10.8 | 41.5 |
| United States Oil Fund | USO | 37.8 | 53.9 | 53 |
| ProShares Ultra VIX Short | UVXY | 91.5 | 12.8 | 32.4 |
| CBOE Market Volatility Index | VIX | 85.1 | 40.8 | 44.1 |
| Barclays S&P 500 VIX ETN | VXX | 62.4 | 13 | 33 |
| SPDR Biotech | XLB | 14.2 | 15.4 | 34.1 |
| SPDR Energy Select | XLE | 22.6 | 14.1 | 42.4 |
| SPDR Financials | XLF | 16.0 | 7.5 | 50.7 |
| SPDR Utilities | XLU | 16.9 | 25.9 | 41.5 |
| SPDR S&P Oil & Gas Explorer | XOP | 27.4 | 12.1 | 40.9 |
| SPDR Retail | XRT | 24.2 | 30.5 | 33.5 |
Stock Watch List – Trade Ideas
| Stock - Quant Trader | Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought |
| Apple | AAPL | 24.5 | 34.5 | 42.4 |
| Bank of America | BAC | 24.1 | 9.4 | 34.4 |
| Bristol-Myers Squibb | BMY | 26.9 | 79.4 | 33.3 |
| Citigroup | C | 25.0 | 8.5 | 52.5 |
| Caterpillar | CAT | 28.7 | 38.6 | 52.4 |
| Comcast | CMCSA | 29.4 | 48.1 | 39.8 |
| Costco | COST | 16.7 | 13.8 | 79.1 |
| Cisco Systems | CSCO | 18.9 | 20.1 | 54.9 |
| Chevron | CVX | 24.6 | 33.6 | 45.7 |
| Disney | DIS | 33.8 | 58.0 | 47.5 |
| Duke Energy | DUK | 19.8 | 25.8 | 55.3 |
| FedEx | FDX | 19.2 | 0.3 | 40.5 |
| Gilead Sciences | GILD | 25.1 | 39.3 | 71.5 |
| General Motors | GM | 35.0 | 35.4 | 39.5 |
| Intel | INTC | 42.1 | 57.7 | 44.4 |
| Johnson & Johnson | JNJ | 18.9 | 48.8 | 75.7 |
| JP Morgan | JPM | 17.8 | 4.6 | 43.8 |
| Coca-Cola | KO | 13.6 | 13.0 | 67.8 |
| Altria Group | MO | 18.5 | 32.3 | 50.1 |
| Merck | MRK | 19.8 | 16.3 | 87.6 |
| Morgan Stanley | MS | 25.8 | 20.8 | 33.8 |
| Microsoft | MSFT | 27.8 | 50.2 | 80.9 |
| NextEra Energy | NEE | 29.9 | 49.8 | 45.4 |
| Nvidia | NVDA | 35.7 | 7.0 | 82.1 |
| Pfizer | PFE | 27.8 | 55.4 | 45.3 |
| PayPal | PYPL | 48.7 | 68.5 | 50.6 |
| Starbucks | SBUX | 31.6 | 76.5 | 29.1 |
| AT&T | T | 29.3 | 48.4 | 38.8 |
| Verizon | VZ | 24.3 | 39.2 | 48.8 |
| Walgreens Boots Alliance | WBA | 37.6 | 41.8 | 29.2 |
| Wells Fargo | WFC | 23.5 | 2.2 | 27 |
| Walmart | WMT | 15.6 | 16.4 | 71.9 |
| Exxon Mobil | XOM | 25.2 | 25.2 | 57.6 |
Weekly Trade Discussion: Open Positions
*Portfolio updated every Monday
No trades at the moment.
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 January 22, 2024.
