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Quant Trader
Expert-Level Options for Sophisticated Traders

COI Quant Trader Issue: January 22, 2024

We added an iron condor last week and hope to add a few more trades this week, including a bear call spread and a bull put spread. I’ll be focusing on sector ETFs and individual stocks as the major indices continue to see low levels of volatility.

We’ve seen an incredible rally since October 27, 2023. SPY was trading for roughly 411 at the time and at the close of the January 19, 2024, expiration cycle the market-leading ETF was trading for 482.43.

Weekly Commentary

We added an iron condor last week and hope to add a few more trades this week, including a bear call spread and a bull put spread. I’ll be focusing on sector ETFs and individual stocks as the major indices continue to see low levels of volatility.

We’ve seen an incredible rally since October 27, 2023. SPY was trading for roughly 411 at the time and at the close of the January 19, 2024, expiration cycle the market-leading ETF was trading for 482.43.

If you look below, on October 27 there was a 1.41% probability that SPY would close above 480 at expiration on January 19 … so a 98.59% probability that SPY would close below 480 on January 19. The expected move at the time was 375 to 445. The VIX was at 21.27. Now it stands at 13.30, down 62.5% to where it was trading roughly three months ago.

COI_QT_012224_SPY_performance.png

After such decisive moves in such a short period of time, I would not be surprised to see some form of mean-reversion kick in. In fact, it should be anticipated.

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 $0.89 83.46% - 91.02%-0.04
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%

Volatility Talk

The march to 15 didn’t last long as the volatility gauge, otherwise known as the VIX, pulled back late in the week to hit 13 again. That being said, 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 3 to 6 months.

COI_QT_012224_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 January 22, 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 ETFARKK39.526.230.7
Proshares Bitcoin ETFBITO59.934.235.4
SPDR Dow JonesDIA12.214.465.9
iShares MSCI Emerging MarketsEEM18.128.141
iShares MSCI EAFEEFA14.217.945.9
iShares MSCI Mexico ETFEWW25.751.946.9
iShares MSCI BrazilEWZ24.83.127.1
iShares China Large-CapFXI32.658.429.8
Vaneck Gold MinersGDX33.946.226.7
SPDR Gold GLD12.820.148.1
iShares High-YieldHYG8.324.950
iShares Russell 2000IWM21.732.744.9
SPDR Regional BankKRE30.418.752.9
Vaneck Oil ServicesOIH32.220.339.9
Invesco Nasdaq 100QQQ17.815.979.9
iShares Silver TrustSLV24.812.133.5
Vaneck SemiconductorSMH27.134.683.8
SPDR S&P 500 SPY 13.511.271.9
iShares 20+ Treasury BondTLT16.72328.3
United States Oil FundUSO35.240.257.8
Proshares Ultra VIX ShortUVXY92.112.440.8
CBOE Market Volatility IndexVIX83.836.848.4
Barclays S&P 500 VIX ETNVXX62.110.941.4
SPDR BiotechXLB15.017.928.4
SPDR Energy Select XLE23.415.430
SPDR FinancialsXLF15.26.164.8
SPDR UtilitiesXLU18.332.421.7
SPDR S&P Oil & Gas ExplorerXOP28.114.426.4
SPDR Retail XRT24.325.937.8

Stock Watch List – Trade Ideas

Stock - Quant TraderTicker Symbol IVIV Rank HPMR Oversold - Overbought
AppleAAPL24.435.966.5
Bank of AmericaBAC24.610.237.3
Bristol-Myers SquibbBMY28.692.333.6
CitigroupC24.87.342.3
CaterpillarCAT30.346.346.2
ComcastCMCSA30.253.354.2
CostcoCOST17.417.283.7
Cisco SystemsCSCO26.352.471.7
ChevronCVX25.737.430.3
DisneyDIS34.571.361.4
Duke EnergyDUK19.932.231.4
FedexFDX20.64.443.3
Gilead SciencesGILD27.344.173.9
General MotorsGM35.938.350.5
IntelINTC46.575.958.9
Johnson & JohnsonJNJ18.849.363
JP MorganJPM17.95.459.2
Coca-ColaKO16.530.450.3
Altria GroupMO20.038.931.9
MerckMRK20.219.782.2
Morgan StanleyMS23.713.029.4
MicrosoftMSFT27.148.087.3
Nextera EnergyNEE33.764.520.6
NvidiaNVDA41.022.989.6
PfizerPFE29.667.141
PaypalPYPL55.487.872.9
StarbucksSBUX31.87553.5
AT&TT29.447.650.5
VerizonVZ23.737.858.5
Walgreens Boots AllianceWBA42.549.420.9
Wells FargoWFC24.45.450.8
WalmartWMT18.133.666.2
Exxon MobilXOM27.131.329.8

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 482.43. Admittedly, we are early in the trade, but our probability sits comfortably at 83.48% on the call side and 91.01% on the put side. Not much to do at the moment other than to allow time decay to work its magic.

Call Side:

COI_QT_012224_SPY_bearcall.png

Put Side:

COI_QT_012224_SPY_bullput.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 January 29, 2024.