COI Quant Trader Issue: June 5, 2023

Weekly Commentary

The market continued to rally this week and as a result, the probability of success on our positions moved slightly lower. That being said, both of our open trades still have a favorable probability of success. Our IWM iron condor sits at approximately 76% (tested side) and our QQQ bear call currently stands at a probability of success of better than 81%. Of course, anything can happen with 47 days left until our positions are due to expire on July 21.

There is no doubt a short-term pullback would be welcome as our positions are currently leaning slightly bearish. Now might be a good time to bring our deltas back to a neutral state (or closer to it) by adding some bullish exposure through a bull put spread. My preference is to be proactive and lean on the latter because sitting back hoping for a pullback or any directional move when selling premium going out 30 to 60 days is often a fool’s game. I say this only because we, as options sellers, have the tools to hedge our positions and decrease our risk through a strategic manner.

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

Current Portfolio

Volatility Talk

All is well in the land of the stock market, at least that is what the VIX is telling us. For the first time in almost two years the VIX closed the week below 15. Yet, historically, the VIX sits below 15 43% of the time, so the question begs, are we in store for more market complacency going forward or is the new low a turning point? Time will tell. And regardless of which way it heads, we will continue to sell high-probability, risk-defined spreads throughout.

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 5, 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 182.02 and our iron condor is worth $1.04. The probability of success on the call side of our iron condor has pushed down to 76% and our delta sits at 0.25. If IWM continues to rally and our 191 call strike hits a delta of 0.30 to 0.35 we will mostly likely make an adjustment, especially since we are so early in the expiration cycle.

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 354.65 and our bear call spread is worth $0.86. The probability of success on our bear call sits at 81.26% and our delta is 0.20. With 47 days left until expiration our position looks good. Obviously, a continued 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 12, 2023.