Weekly Commentary
The market continues to rally higher. And while some of the momentum was lost on Friday, the bulls, at least for the moment, continue to control price action.
We are witnessing overbought levels not seen in five to six years – overbought levels that have only been reached less than a handful of times over the past 20 years.
Source: Bespoke Invest
Couple the aforementioned with numerous upside gaps that have yet to close in the major indices and some bearish seasonal winds blowing in for the VIX as well as the Nasdaq 100 and, well, I wouldn’t be at all surprised to see a short-term reprieve over the next few weeks.
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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 | $1.79 | 75.20% | -0.1 |
| 5/26/2023 | IWM | Iron Condor | July 21, 2023 196/191 - 156/151 | $0.79 | $1.38 | 66.86% - 96.90% | -0.15 |
| 6/15/2023 | SPY | Bear Call | August 18, 2023 465/470 | $0.70 | $0.57 | 86.79% | -0.05 |
| 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% |
| 143.62% | |||||||
Volatility Talk
The VIX continues to be mired in its lowest levels since February 2020. We continue to see some of the most oversold levels in quite some time for the investor’s fear gauge. Historically when this type of short-term extreme occurs in the VIX a reversion to the mean is near.
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 20, 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
| Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought | |
| ARK Innovation ETF | ARKK | 37.8 | 3 | 74.6 |
| Proshares Bitcoin ETF | BITO | 41.6 | 9.1 | 49.3 |
| SPDR Dow Jones | DIA | 12.3 | 3.3 | 65.2 |
| iShares MSCI Emerging Markets | EEM | 15.7 | 9 | 73.9 |
| iShares MSCI EAFE | EFA | 12.5 | 6.7 | 63.4 |
| iShares MSCI Mexico ETF | EWW | 17.7 | 6.1 | 72.2 |
| iShares MSCI Brazil | EWZ | 26.8 | 0.5 | 69.4 |
| iShares China Large-Cap | FXI | 28.0 | 4.6 | 69.9 |
| Vaneck Gold Miners | GDX | 28.2 | 6.1 | 52.7 |
| SPDR Gold | GLD | 12.6 | 6.2 | 48.4 |
| iShares High-Yield | HYG | 7.5 | 2.4 | 61.3 |
| iShares Russell 2000 | IWM | 20.1 | 2 | 58.6 |
| SPDR Regional Bank | KRE | 38.0 | 21.7 | 53.9 |
| Vaneck Oil Services | OIH | 33.9 | 2.2 | 57.9 |
| Invesco Nasdaq 100 | QQQ | 20.1 | 6.6 | 76.2 |
| iShares Silver Trust | SLV | 26.5 | 3.9 | 59.6 |
| Vaneck Semiconductor | SMH | 28.6 | 13.3 | 70.9 |
| SPDR S&P 500 | SPY | 13.6 | 0.3 | 73.5 |
| iShares 20+ Treasury Bond | TLT | 15.0 | 0.7 | 55.2 |
| United States Oil Fund | USO | 32.6 | 8.1 | 58.6 |
| Proshares Ultra VIX Short | UVXY | 126.0 | 48 | 21.7 |
| CBOE Market Volatility Index | VIX | 91.3 | 31.3 | 35.3 |
| Barclays S&P 500 VIX ETN | VXX | 72.0 | 20.7 | 22.4 |
| SPDR Biotech | XLB | 15.9 | 4.6 | 74.5 |
| SPDR Energy Select | XLE | 23.9 | 0.6 | 55 |
| SPDR Financials | XLF | 17.1 | 1.2 | 71.5 |
| SPDR Utilities | XLU | 14.9 | 1.1 | 72.4 |
| SPDR S&P Oil & Gas Explorer | XOP | 31.4 | 0.5 | 60.4 |
| SPDR Retail | XRT | 25.7 | 7.9 | 57.9 |
Stock Watch List – Trade Ideas
| Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought | |
| Apple | AAPL | 20.1 | 0.3 | 71.3 |
| Bank of America | BAC | 28.1 | 7.1 | 56.1 |
| Bristol-Myers Squibb | BMY | 17.7 | 4.2 | 64.6 |
| Citigroup | C | 28.3 | 7.7 | 62.4 |
| Caterpillar | CAT | 25.3 | 1.9 | 73.3 |
| Comcast | CMCSA | 21.7 | 2.3 | 66.3 |
| Costco | COST | 17.1 | 0.1 | 61.6 |
| Cisco Systems | CSCO | 16.9 | 0.3 | 86.1 |
| Chevron | CVX | 23.0 | 0.8 | 50.4 |
| Disney | DIS | 26.5 | 8.1 | 43.8 |
| Duke Energy | DUK | 16.9 | 4.7 | 62.1 |
| Fedex | FDX | 36.1 | 39.9 | 67.2 |
| Gilead Sciences | GILD | 22.2 | 3.5 | 59.7 |
| General Motors | GM | 30.7 | 0.5 | 78.2 |
| Intel | INTC | 42.4 | 34.4 | 82.8 |
| Johnson & Johnson | JNJ | 13.7 | 0.6 | 86.1 |
| JP Morgan | JPM | 22.3 | 7.8 | 74.6 |
| Coca-Cola | KO | 12.4 | 0.5 | 68.8 |
| Altria Group | MO | 15.2 | 0.8 | 35.3 |
| Merck | MRK | 20.8 | 14.1 | 40.2 |
| Morgan Stanley | MS | 24.9 | 5.9 | 64.5 |
| Microsoft | MSFT | 24.1 | 14.1 | 65.5 |
| Nextera Energy | NEE | 20.2 | 3 | 64.6 |
| Nvidia | NVDA | 45.6 | 14.7 | 77.1 |
| Pfizer | PFE | 20.2 | 4.9 | 65 |
| Paypal | PYPL | 35.1 | 3.5 | 72.7 |
| Starbucks | SBUX | 19.7 | 0.6 | 66.4 |
| AT&T | T | 26.1 | 24.4 | 57.1 |
| Verizon | VZ | 21.4 | 16.2 | 70.7 |
| Walgreens Boots Alliance | WBA | 34.2 | 30.3 | 70.5 |
| Wells Fargo | WFC | 33.1 | 24.3 | 57.9 |
| Walmart | WMT | 14.8 | 0.5 | 66.4 |
| Exxon Mobil | XOM | 25.4 | 2.9 | 42.3 |
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, IWM 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 185.94 and our iron condor is worth $1.38. The probability of success on the call side of our iron condor has pushed down to 68.86% and the delta sits at 0.35. With 32 days left until expiration, if IWM continues to rally we will either need to make an adjustment 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 367.93 and our bear call spread is worth $1.79. The probability of success on our bear call sits at 75.20% and our delta is 0.41. With 32 days left until expiration, much like our IWM iron condor, we will either need to make an adjustment or simply get out of the trade, take a small loss and move on.
Call Side:
Bear Call: SPY August 18, 2023, 465/470 calls
Original trade published on 6-15-2023 (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 465/470 bear call spread for $0.70. The expected range or move was 425 to 470. We placed our bear call spread 4 points higher than the expected move.
Current Thoughts: SPY is now trading for 354.50 and our bear call spread is worth $0.57. The probability of success on our bear call sits at 86.79% and our delta is 0.14. With 60 days left until expiration, our position looks good. We will take off our position when we can take at least 50% to 75% of the original credit or premium sold, or $0.35 to roughly $0.15.
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 26, 2023.