Weekly Commentary
Okay, we are back at it after the holiday-shortened week.
The plan this week is to add another iron condor to the portfolio and potentially a bull put spread. Both positions, particularly the bull put spread, will help to balance out the deltas of our portfolio. Currently our open positions consist of two bear call spreads and as a result, the overall leaning is to the short side. While I’m not opposed to the slight bearish leaning, I would like to bring it back closer to a neutral state. Of course, if we manage to take off both of our bear call spreads for profits, which I think we all hope that will be the case, our current state of short deltas won’t be an issue.
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 |
| 5/31/2023 | QQQ | Bear Call | July 21, 2023 375/380 | $0.60 | $0.94 | 76.66% | -0.09 |
| 6/30/2023 | SPY | Bear Call | August 18, 2023 462/466 | $0.52 | $0.31 | 91.20% | -0.03 |
| 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% |
| 159.90% | |||||||
Volatility Talk
The VIX finally popped out of the month-long, range-bound action, closing the week at 15.39. Now the question is, will we see further upside for the so-called “investor’s fear gauge”?
If Friday’s price action around the close is any indication, my guess is that the VIX will continue to climb higher as we move through July. Seasonal weakness, coupled with overbought conditions over numerous time frames and several unclosed gaps, seem to be weighing on the continued success of the markets in 2023 and, well, it makes perfect senses when you look at indices like the Nasdaq 100. This is not to say further gains aren’t ahead, no one knows, but oftentimes when we see these types of conditions line up a reprieve is in the midst…and that is exactly what we’ve seen recently. Again, the question is, will it continue? Either way, the push higher in premium will certainly make selling premium more attractive and that is what we are most concerned with going forward.
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 July 10, 2023.
Here are the various levels I use to determine if an ETF is in an oversold or overbought state.
| Very Overbought | greater than or equal to 80.1 |
| Overbought | 60.1 to 80.0 |
| Neutral | 40.1 to 60 |
| Oversold | 20.1 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 | 36.6 | 0.8 | 50.8 |
| Proshares Bitcoin ETF | BITO | 53.8 | 14 | 43.7 |
| SPDR Dow Jones | DIA | 12.2 | 3.3 | 37.6 |
| iShares MSCI Emerging Markets | EEM | 16.2 | 8.2 | 46.2 |
| iShares MSCI EAFE | EFA | 13.1 | 9.7 | 39.4 |
| iShares MSCI Mexico ETF | EWW | 20.0 | 11.9 | 51.4 |
| iShares MSCI Brazil | EWZ | 29.6 | 8.2 | 48.5 |
| iShares China Large-Cap | FXI | 28.6 | 6.2 | 47.4 |
| Vaneck Gold Miners | GDX | 29.3 | 4.7 | 41.6 |
| SPDR Gold | GLD | 12.2 | 1.3 | 50.9 |
| iShares High-Yield | HYG | 7.2 | 3.2 | 33.7 |
| iShares Russell 2000 | IWM | 19.3 | 1.7 | 50.4 |
| SPDR Regional Bank | KRE | 36.0 | 19.5 | 52.8 |
| Vaneck Oil Services | OIH | 32.3 | 2.3 | 83.4 |
| Invesco Nasdaq 100 | QQQ | 20.0 | 6 | 53.1 |
| iShares Silver Trust | SLV | 25.2 | 4.6 | 53.2 |
| Vaneck Semiconductor | SMH | 26.4 | 5.2 | 45.2 |
| SPDR S&P 500 | SPY | 13.5 | 2 | 51.6 |
| iShares 20+ Treasury Bond | TLT | 15.1 | 4.6 | 26.2 |
| United States Oil Fund | USO | 32.3 | 7.5 | 69.8 |
| Proshares Ultra VIX Short | UVXY | 93.2 | 6.8 | 45.2 |
| CBOE Market Volatility Index | VIX | 83.4 | 32.7 | 65.8 |
| Barclays S&P 500 VIX ETN | VXX | 64.4 | 8.6 | 44.8 |
| SPDR Biotech | XLB | 15.3 | 1.7 | 50.8 |
| SPDR Energy Select | XLE | 22.5 | 0.6 | 56.2 |
| SPDR Financials | XLF | 15.4 | 0.2 | 58.8 |
| SPDR Utilities | XLU | 14.6 | 4 | 44.6 |
| SPDR S&P Oil & Gas Explorer | XOP | 29.6 | 1.3 | 59.6 |
| SPDR Retail | XRT | 24.5 | 5 | 60.9 |
Stock Watch List – Trade Ideas
| Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought | |
| Apple | AAPL | 23.8 | 13.2 | 59.9 |
| Bank of America | BAC | 28.4 | 8.4 | 48.1 |
| Bristol-Myers Squibb | BMY | 20.3 | 21.7 | 24.1 |
| Citigroup | C | 27.3 | 5.1 | 37.9 |
| Caterpillar | CAT | 27.3 | 13.7 | 59.2 |
| Comcast | CMCSA | 26.6 | 15 | 56.8 |
| Costco | COST | 15.9 | 2.7 | 39.5 |
| Cisco Systems | CSCO | 15.6 | 1.2 | 47.6 |
| Chevron | CVX | 23.1 | 1.8 | 44.7 |
| Disney | DIS | 24.6 | 1.9 | 38.5 |
| Duke Energy | DUK | 19.5 | 9.6 | 43.3 |
| Fedex | FDX | 21.9 | 1.4 | 76.1 |
| Gilead Sciences | GILD | 23.1 | 11.5 | 27.1 |
| General Motors | GM | 34.5 | 11.8 | 81.7 |
| Intel | INTC | 43.5 | 37.5 | 35.4 |
| Johnson & Johnson | JNJ | 15.4 | 11.8 | 27.9 |
| JP Morgan | JPM | 21.0 | 4.3 | 59.3 |
| Coca-Cola | KO | 14.5 | 10.6 | 33.3 |
| Altria Group | MO | 15.4 | 5.2 | 72 |
| Merck | MRK | 20.2 | 13.8 | 30.5 |
| Morgan Stanley | MS | 26.3 | 10 | 35.2 |
| Microsoft | MSFT | 30.0 | 37.2 | 50.8 |
| Nextera Energy | NEE | 22.2 | 7 | 32.8 |
| Nvidia | NVDA | 41.9 | 3.7 | 59.8 |
| Pfizer | PFE | 23.2 | 19.6 | 21.5 |
| Paypal | PYPL | 37.6 | 8.7 | 50.7 |
| Starbucks | SBUX | 25.8 | 21.5 | 22.4 |
| AT&T | T | 29.3 | 39.6 | 37.1 |
| Verizon | VZ | 23.7 | 25.1 | 36.2 |
| Walgreens Boots Alliance | WBA | 26.2 | 2.7 | 37.5 |
| Wells Fargo | WFC | 29 | 12.7 | 59.4 |
| Walmart | WMT | 13.7 | 1.8 | 37.5 |
| Exxon Mobil | XOM | 24.7 | 2.9 | 35.9 |
Weekly Trade Discussion: Open Positions
*Portfolio updated every Monday
Bear Call: QQQ July 21, 2023, 375/380 calls
Original trade published on 5-31-2023 (click to see original alert)
Background: At the time of the trade, QQQ was trading for 347.14. We sold the July 21, 2023, QQQ 375/380 bear call spread for $0.60. The expected range or move was 326 to 368. We placed our bear call spread 7 points higher than the expected move.
Current Thoughts: QQQ is now trading for 366.24, and our bear call spread is now worth $0.93. The probability of success on our bear call sits at 75.71% and the delta of our short call sits at 0.25. With 11 days left until expiration our QQQ bear call spread looks like it is in good shape again. There is no doubt it’s been somewhat of a wild ride with this position. However, if we see a continuation of the short-term pullback over the next week, or simply just hold around its current price, we might have a good chance to take the position off the table for a decent profit.
Call Side:
Bear Call: SPY August 18, 2023, 462/466 calls
Original trade published on 6-30-2023 (click to see original alert)
Background: At the time of the trade, SPY was trading for 442.50. We sold the August 18, 2023, SPY 462/466 bear call spread for $0.52. The expected range or move was 428 to 457. We placed our bear call spread 5 points higher than the expected move.
Current Thoughts: SPY is now trading for 438.55, roughly $4 lower than when we placed the trade. The probability of success on our bear call sits at 91.05% and the delta of our short call sits at a comfortable 0.10. With 39 days left until expiration our SPY bear call spread looks in good shape. Time decay will begin to truly accelerate over the next week or so, and if all goes well and SPY stays around this area, or better yet, moves lower, we should be able to lock in our second successful trade for the August 18 expiration cycle. The price of our spread is currently $0.31.
Call 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
July 17, 2023.