COI Quant Trader Issue: July 17, 2023

Weekly Commentary

We enter the week with several trading opportunities on the horizon. My plan is to add two trades this week, an iron condor and the potential for another bear call spread.

Implied volatility ranks, otherwise known as IV ranks, are low across the board. IV rank is where the current implied volatility (IV) sits in comparison to the last 12 months of readings. This makes sense given the recent surge in the market, right? And while macro conditions seem to be improving, with more indicators showing a bullish bias and numerous other bullish signals, we have to remember, we place trades going out 45 to 60 days in Quant Trader with the average trade lasting 20.5 days. Probabilities lead the way, not the latest inflation report, and given our short windows (45 to 60 days) we don’t really care about what happens three months, six months, a year from now. In my Fundamentals service, it’s a different story: The intermediate to long term matter, but not with Quant Trader. Collecting premium/income, consistently over the long term, is the ultimate goal.

If you have any questions, please do not hesitate to email me at andy@cabotwealth.com.

Current Portfolio

Volatility Talk

After a brief stint above 15, the investor’s fear gauge pushed back down in the low 13s, closing Friday at 13.34. Since the beginning of June, the VIX has traded in a fairly tight range, between 13 and 15. A rising market often creates complacency among traders and the VIX will fall and stay suppressed as the demand for put options decreases … and this has no doubt been the case over the past 45 days as the S&P 500 has raced 7.5% higher.

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 17, 2023.

Here are the various levels I use to determine if an ETF is in an oversold or overbought state.

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

Stock Watch List – Trade Ideas

Weekly Trade Discussion: Open Positions

*Portfolio updated every Monday

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 449.28, roughly $7 higher than when we placed the trade. The probability of success on our bear call sits at 78.71% and the delta of our short call sits at a comfortable 0.22. With 32 days left until expiration our SPY bear call spread looks in good shape. Time decay has kicked in and is accelerating as each day passes, and if SPY stays around this area, or better yet, moves lower, we should be able to lock in a decent profit.

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 24, 2023.