Please ensure Javascript is enabled for purposes of website accessibility
Quant Trader
Expert-Level Options for Sophisticated Traders

COI Quant Trader Issue: March 25, 2024

The goal is simple this week. We have two open bear call spread positions at the moment which means our portfolio currently leans to the short side of things. This week, if the market cooperates, I plan to add some long exposure through a debit spread, or a bull put spread, to even out our deltas so our portfolio takes a more neutral stance. There is no doubt that the air is getting thin at these levels. But, as we have seen recently, just when you think the market might take a turn, the bulls make an appearance.

Weekly Commentary

The goal is simple this week. We have two open bear call spread positions at the moment which means our portfolio currently leans to the short side of things. This week, if the market cooperates, I plan to add some long exposure through a debit spread, or a bull put spread, to even out our deltas so our portfolio takes a more neutral stance. There is no doubt that the air is getting thin at these levels. But, as we have seen recently, just when you think the market might take a turn, the bulls make an appearance.

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

Current Portfolio

Open Trades

Open DateTickerStrategyTradeOpen PriceCurrent PriceCurrent ProbabilityDelta
3/13/2024SPYBear CallMay 17, 2024 535/540$1.33 $1.60 68.45%-0.08
3/19/2024QQQBear CallApril 26, 2024 460/465$0.91 $1.30 72.02%-0.07
Open DateClosed DateTickerStrategy TradeOpen PriceClosing PriceReturn
6/2/20226/13/2022SPYBear Call SpreadJuly 15, 2022 440/445 $0.70 $0.05 14.94%
6/8/20226/17/2022XOPBear Call SpreadJuly 15, 2022 190/195$0.70 $0.04 15.21%
6/22/20227/13/2022SPYBear Call SpreadJuly 29, 2022 405/410$0.75 $0.35 8.70%
6/30/20227/25/2022IWMIron CondorAugust 19, 2022 195/200 - 145/140$0.70 $0.34 7.76%
7/8/20227/28/2022GLDBull Put SpreadAugust 19, 2022 155/150 $0.60 $0.16 9.65%
7/14/20228/11/2022SPYIron CondorAugust 19, 2022 417/412 - 335/330$0.70 $4.10 -68.00%
8/1/20228/29/2022SPYBear Call SpreadSeptember 16, 2022 439/444$0.70 $0.07 14.42%
8/11/20228/29/2022DIABear Call SpreadSeptember 23, 2022 350/325$0.75 $0.08 15.47%
8/11/20229/8/2022IWMIron CondorSeptember 23, 2022 220/215 - 173/168$0.77 $0.57 4.17%
9/7/20229/9/2022QQQBull Put SpreadOctober 21, 2022 260/255$0.62 $0.30 6.84%
9/9/20229/15/2022SPYBear Call SpreadOctober 21, 2022 430/435$0.75 $0.25 11.11%
9/13/202210/17/2022IWMIron CondorOctober 21, 2022 208/203 - 163/158$0.77 $0.30 10.40%
10/3/202210/25/2022SPYBull Put SpreadNovember 18, 2022 325/320 $0.54 $0.09 9.89%
10/4/202211/2/2022IWMIron CondorNovember 18, 2022 198/203 - 143/138$0.64 $0.32 6.84%
10/6/202211/2/2022SPYBear Call SpreadNovember 18, 2022 412/416$0.43 $0.28 3.90%
11/16/202211/28/2022IWMIron CondorDecember 16, 2022 205/200 - 162/157$0.75 $0.24 11.36%
11/10/202212/6/2022SPYBear Call SpreadDecember 16, 2022 420/425$0.65 $0.14 11.36%
12/1/202212/6/2022SPYBear Call SpreadJanuary 20, 2023 435/440$0.67 $0.18 10.86%
12/13/202212/15/2022SPYBear Call SpreadJanuary 20, 2023 430/435$0.54 $0.17 7.99%
12/7/20231/6/2023IWMIron CondorJanuary 20, 2023 202/198 - 160/156$0.70 $0.06 19.00%
1/4/20232/1/2023IWMIron CondorFebruary 17, 2023 200/195 - 154/149$0.65 $2.00 -27.00%
1/6/20232/2/2023SPYBear Call SpreadFebruary 17, 2023 415/420 $0.60 $2.50 -38.00%
2/2/20232/15/2023SPYBear Call SpreadMarch 17, 2023 440/445$0.63 $0.15 10.62%
2/10/20232/22/2023DIABear Call SpreadMarch 31, 2023 355/360$0.70 $0.17 11.86%
2/2/20233/1/2023IWMIron CondorMarch 17, 2023 175/180 - 215/220$0.72 $0.51 4.38%
3/6/20233/13/2023DIABear Call SpreadApril 21, 2023 350/355$0.85 $0.17 15.74%
2/23/20233/28/2023SPYIron CondorApril 21, 2023 435/430 - 350/345$0.80 $0.15 14.94%
3/23/20234/11/2023DIABear Call SpreadApril 21, 2023 338/443$0.62 $2.05 -28.60%
3/23/20234/19/2023IWMIron CondorMay 19, 2023 196/191 - 147/142$0.83 $0.23 13.64%
4/12/20234/21/2023DIABear Call SpreadMay 19, 2023 350/355$0.82 $0.44 8.23%
4/21/20235/2/2023SPYIron CondorJune 16, 2023 440/435 - 365/360$0.95 $0.63 6.84%
4/24/20235/10/2023DIABear Call SpreadJune 16, 2023 354/359$0.72 $0.22 11.11%
5/5/20235/24/023SPYBear Call SpreadJune 16, 2023 430/435$0.72 $0.35 7.99%
6/15/20236/22/2023SPYBear Call SpreadAugust 18, 2023 465/470$0.70 $0.24 10.13%
5/26/20236/23/2023IWMIron CondorJuly 21, 2023 191/196 - 156/151$0.79 $0.50 6.15%
5/31/20237/12/2023QQQBear Call SpreadJuly 21, 2023 375/380$0.60 $1.80 -31.60%
6/30/20238/7/2023SPYBear Call SpreadAugust 18, 2023 462/466$0.52 $0.23 7.82%
8/4/20238/11/2023SPYBear Call SpreadSeptember 15, 2023 470/475$0.65 $0.20 9.90%
8/17/20239/13/2023SPYIron CondorOctober 20, 2023 475/470 - 390/385$0.72 $0.25 10.38%
9/6/202310/11/2023IWMIron CondorOctober 20, 2023 204/199 - 169/164$0.62 $0.19 9.41%
* 9/29/202310/27/2023SPYBear Call SpreadNovember 17, 2023 452/457$0.74 $0.03 16.60%
*10/6/202311/3/2023SPYBull Put SpreadNovember 17, 2023 408/403$0.58 $0.03 12.36%
* 10/27/202311/3/2023SPYBear Call SpreadNovember 17, 2023 430/435$0.58 $3.50 -33.20%
10/31/202311/14/2023SPYIron CondorDecember 15, 2023 450/445 - 380/375$0.77 $3.00 -44.60%
11/6/202312/8/2023SPYBear Call SpreadDecember 15, 2023 456/461$0.58 $3.08 -50.00%
12/1/20231/10/2024SPYBear Call SpreadJanuary 19, 2024 475/480$0.75 $2.75 -40.00%
1/23/20242/21/2024QQQBear Call SpreadMarch 1, 2024 445/450 $0.60 $0.20 8.70%
1/16/20243/15/2024SPYIron CondorMarch 15, 2024 510/505 - 440/435 $0.66 $3.11 -49.00%

Volatility Matrix

Nothing has changed since last week. IV Ranks remain low across our watch list with few exceptions. BITO still offers an incredibly high IV and could be an interesting play. SMH, EWW, GDX and even IWM are the other highly liquid ETFs that offer decent IV Ranks. My preference is to see IV Ranks above 30 when using options selling strategies.

When looking at the other ETFs, my preference would be to use a strategy that takes advantage of cheap premium and potential volatility expansion … a bear put spread or bull call spread comes to mind, with the former being the preference. These are debit spread strategies that I might employ as a mix to our predominantly premium selling strategies and to play a potential volatility expansion as we move ever closer to the November elections.

COI_QT_032524_volatilitymatrix.png

Volatility Talk

The VIX continues to be mired below the 15 handle and until we see a sustained move above 15, we should expect to see a challenging environment for selling premium in the major index ETFs. As it stands, it’s smooth sailing for the bulls as complacency, as seen through the low levels of the VIX, continues to reign supreme.

COI_QT_032524_VIX.png

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 March 25, 2024.

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

Very Overboughta reading greater than or equal to 80.0
Overboughtgreater than or equal to 60.0
Neutralbetween 40 to 60
Oversoldless than or equal to 40.0
Very Oversoldless 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 FundTicker Symbol IVIV Rank HPMR Oversold - Overbought
ARK Innovation ETFARKK37.023.546.9
ProShares Bitcoin ETFBITO81.576.940.1
SPDR Dow JonesDIA12.515.561.1
iShares MSCI Emerging MarketsEEM13.411.950.8
iShares MSCI EAFEEFA11.45.866.3
iShares MSCI Mexico ETFEWW20.523.360.2
iShares MSCI BrazilEWZ22.325.440.9
iShares China Large-CapFXI27.314.942.8
VanEck Gold MinersGDX31.540.653
SPDR Gold GLD12.446.157.1
iShares High-YieldHYG6.228.963.7
iShares Russell 2000IWM20.439.553
SPDR Regional BankKRE29.724.250.1
VanEck Oil ServicesOIH23.3-1.980.6
Invesco Nasdaq 100QQQ17.317.464.4
iShares Silver TrustSLV23.611.852
VanEck SemiconductorSMH33.263.865.2
SPDR S&P 500 SPY 12.912.568
iShares 20+ Treasury BondTLT13.51.355.1
United States Oil FundUSO27.08.158.5
ProShares Ultra VIX ShortUVXY89.811.531.2
CBOE Market Volatility IndexVIX80.955.534.5
Barclays S&P 500 VIX ETNVXX61.813.232.9
SPDR BiotechXLB13.522.167.1
SPDR Energy Select XLE16.7-2.278.7
SPDR FinancialsXLF14.99.362.5
SPDR UtilitiesXLU15.81562
SPDR S&P Oil & Gas ExplorerXOP21.0-0.976.1
SPDR Retail XRT20.627.462.1

Stock Watch List – Trade Ideas

Stock - Quant TraderTicker Symbol IVIV Rank HPMR Oversold - Overbought
AppleAAPL23.138.443
Bank of AmericaBAC25.520.770.1
Bristol-Myers SquibbBMY29.955.346.7
CitigroupC28.127.378.2
CaterpillarCAT26.330.469.7
ComcastCMCSA28.148.147.3
CostcoCOST18.214.547.3
Cisco SystemsCSCO16.26.957.7
ChevronCVX18.14.256
DisneyDIS24.520.271.1
Duke EnergyDUK18.210.250.1
Gilead SciencesGILD25.025.536.4
General MotorsGM27.77.473.9
IntelINTC38.936.543.4
Johnson & JohnsonJNJ18.245.124.6
JPMorganJPM23.238.268.8
Coca-ColaKO13.111.054.8
Altria GroupMO17.622.844.5
MerckMRK23.264.256.5
Morgan StanleyMS27.837.266.7
MicrosoftMSFT21.513.369.8
Nextera EnergyNEE24.927.675.2
NvidiaNVDA51.853.574.2
PfizerPFE24.736.942.7
PayPalPYPL34.119.564.3
StarbucksSBUX19.91939.9
AT&TT23.42440.9
VerizonVZ25.328.558.3
Walgreens Boots AllianceWBA50.67938.7
Wells FargoWFC27.124.453.4
WalmartWMT16.128.354.8
Exxon MobilXOM18.70.184.5

Weekly Trade Discussion: Open Positions

*Portfolio updated every Monday

Bear Call: SPY May 17, 2024, 535/540

Original trade published on 3-13-2024 (click to see original alert)

Background: At the time of the trade, SPY was trading for roughly 516.14. We sold the May 17, 2024, SPY 535/540 bear call for $1.33. The expected range or move was 495 to 537. The probability of success at the time of the trade was 72.31%.

Current Thoughts: The SPY now sits at 521.21, roughly $5 higher than when we placed the trade. With 54 days left until the end of the May 17 expiration, SPY remains below our short call strike of 535. Our probability of success now stands at 68.50% and our bear call spread is currently worth $1.60.

Call Side:

COI_QT_032524_SPY_bearcall.png

Bear Call: QQQ April 26, 2024, 460/465

Original trade published on 3-19-2024 (click to see original alert)

Background: At the time of the trade, QQQ was trading for roughly 436.50. We sold the April 26, 2024, QQQ 460/465 bear call for $0.91. The expected range or move was 420 to 458. The probability of success at the time of the trade was 80.16%.

Current Thoughts: The QQQs now sit at 446.38, roughly $10 higher than when we placed the trade. With 33 days left until the end of the April 26 expiration, QQQ still sits well below our short call strike of 460. Our probability of success now stands at 72.08% and our bear call spread is currently worth $1.30.

Call Side:

COI_QT_032524_QQQ_bearcall.png

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 April 1, 2024.


Copyright © 2024. All rights reserved. Copying or electronic transmission of this information without permission is a violation of copyright law. For the protection of our subscribers, copyright violations will result in immediate termination of all subscriptions without refund. Disclosures: Cabot Wealth Network exists to serve you, our readers. We derive 100% of our revenue, or close to it, from selling subscriptions to our publications. Neither Cabot Wealth Network nor our employees are compensated in any way by the companies whose stocks we recommend or providers of associated financial services. Employees of Cabot Wealth Network may own some of the stocks recommended by our advisory services. Disclaimer: Sources of information are believed to be reliable but they are not guaranteed to be complete or error-free. Recommendations, opinions or suggestions are given with the understanding that subscribers acting on information assume all risks involved. Buy/Sell Recommendations: are made in regular issues, updates, or alerts by email and on the private subscriber website. Subscribers agree to adhere to all terms and conditions which can be found on CabotWealth.com and are subject to change. Violations will result in termination of all subscriptions without refund in addition to any civil and criminal penalties available under the law.