COI Quant Trader Issue: June 12, 2023

Weekly Commentary

Before we get started, our next Live Analyst Briefing with Q&A is scheduled for June 15, 2023, at 12 p.m. ET, where we will be discussing the options market, giving a detailed look at open positions, strategies used, and will have a follow-up with live questions and answers. Register here.

The market sits at a pivotal juncture with volatility sitting at the lowest levels in a few years. The week ahead is littered with market-moving events. But Wednesday is the day that offers up the most intriguing and potentially market-moving event. Wednesday at 2:00 ET we have the Fed’s rate decision, FOMC statement, and economic projections followed by Chairman Jerome Powell speaking at 2:30. I would expect to see price action vacillate widely immediately after the event. I’ll be paying close attention to see how the VIX reacts prior to and after the statement.

Subscriber-Only Webinar

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

Current Portfolio

Volatility Talk

The VIX closed at its lowest weekly level since February 2020. Moreover, we are seeing some of the most oversold levels in quite some time and historically when this type of short-term extreme occurs in the VIX a reversion to the mean is near. The upcoming economic calendar could spark the move. No one knows for certain, but I would expect to see some volatility to return at least over the near-term.

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 June 12, 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

Iron Condor: IWM July 21, 2023, 196/191 calls – 156/151 puts
Original trade published on 5-26-2023 (click to see original alert)

Background: At the time of the trade, IWM was trading for 176.20. We sold the July 21, 2023, SPY 196/191 – 156/151 iron condor for $0.79. The expected range or move was 165 to 188.

Current Thoughts: IWM is now trading for 185.03 and our iron condor is worth $1.36. The probability of success on the call side of our iron condor has pushed down to 68.33% and the delta sits at 0.34. If IWM continues to rally we will most likely need to make an adjustment, especially since we are so early in the expiration cycle. Or we could simply get out of the trade, take a small loss and move on.

Call Side:

Put Side:

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 354.50 and our bear call spread is worth $0.70. The probability of success on our bear call sits at 83.41% and our delta is 0.06. With 40 days left until expiration our position looks good. Obviously, a sharp rally will quickly change the position’s current good fortune.

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

June 20, 2023.