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Quant Trader
Expert-Level Options for Sophisticated Traders

COI Quant Trader Issue: November 20, 2023

As we enter the holiday-shortened week, we have one open position. My intent is to add another trade this week, so we have at least two positions headed into the December expiration cycle. Other than that there isn’t much to discuss at the moment.

Weekly Commentary

As we enter the holiday-shortened week, we have one open position. My intent is to add another trade this week, so we have at least two positions headed into the December expiration cycle. Other than that there isn’t much to discuss at the moment.

I hope all of you have a wonderful Thanksgiving and for those outside of the U.S., well, enjoy the holiday-shortened trading week as we will be ramping things up as we head into 2024. I will be adding a few additional trades in the standard, highly liquid ETFs we follow, plus I plan on adding a few individual stocks to the mix.

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

Current Portfolio

Open DateTickerStrategyTradeOpen PriceCurrent PriceCurrent ProbabilityDelta
11/6/2023SPYBear CallDecember 15, 2023 456/461$0.58 $1.71 62.67%-0.13
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%

Volatility Talk

The investor’s fear gauge, otherwise known as the VIX, continued to push further into short-term oversold territory this past week. As a result, not much has changed, and my sentiment remains the same: I wouldn’t be surprised to see the VIX test the lows established in October before a reversion to the mean event occurs. And given all the geopolitical turmoil, etc., I don’t think sitting at current levels (or lower) will last. With the VIX at 13.80 we’ve now hit the high side of the range of established lows set back during the late-June to September period. It will be interesting to see if volatility trades around this area into the new year or simply mean reverts over the next few trading sessions. As it stands, our current position would love for the latter to occur sooner than later. And, of course, we would love to see higher levels of implied volatility so that we have the opportunity to sell options premium at higher levels.

COI_QT_112023_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 November 20, 2023.

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 ETFARKK37.316.773.9
Proshares Bitcoin ETFBITO63.540.656
SPDR Dow JonesDIA11.710.976.7
iShares MSCI Emerging MarketsEEM17.224.168
iShares MSCI EAFEEFA12.71383.4
iShares MSCI Mexico ETFEWW21.120.378.2
iShares MSCI BrazilEWZ30.911.375.9
iShares China Large-CapFXI29.213.348.7
Vaneck Gold MinersGDX32.332.153.7
SPDR Gold GLD12.92160.5
iShares High-YieldHYG7.726.170.8
iShares Russell 2000IWM21.129.467.2
SPDR Regional BankKRE31.310.872.5
Vaneck Oil ServicesOIH32.021.542.1
Invesco Nasdaq 100QQQ17.83.780.4
iShares Silver TrustSLV26.524.172.1
Vaneck SemiconductorSMH26.213.686.5
SPDR S&P 500 SPY 14.213.481.7
iShares 20+ Treasury BondTLT18.536.364.9
United States Oil FundUSO40.859.842
Proshares Ultra VIX ShortUVXY101.720.121.2
CBOE Market Volatility IndexVIX85.644.630.6
Barclays S&P 500 VIX ETNVXX69.319.620.6
SPDR BiotechXLB15.112.774.3
SPDR Energy Select XLE22.414.650.5
SPDR FinancialsXLF15.64.183.9
SPDR UtilitiesXLU18.134.866.5
SPDR S&P Oil & Gas ExplorerXOP28.716.346.8
SPDR Retail XRT26.734.463.3

Stock Watch List – Trade Ideas

Stock - Quant TraderTicker Symbol IVIV Rank HPMR Oversold - Overbought
AppleAAPL21.03.980.8
Bank of AmericaBAC27.617.780.4
Bristol-Myers SquibbBMY24.051.639.9
CitigroupC26.29.383.4
CaterpillarCAT24.415.267.7
ComcastCMCSA22.714.355.6
CostcoCOST21.332.553.2
Cisco SystemsCSCO18.614.219.2
ChevronCVX22.018.544.6
DisneyDIS24.41.478.6
Duke EnergyDUK19.122.359.6
FedexFDX26.619.768.2
Gilead SciencesGILD22.625.140.4
General MotorsGM37.044.950.8
IntelINTC32.813.485.3
Johnson & JohnsonJNJ18.846.853.6
JP MorganJPM18.94.284.9
Coca-ColaKO16.528.567.3
Altria GroupMO18.427.558.5
MerckMRK20.323.341.5
Morgan StanleyMS23.39.777
MicrosoftMSFT22.615.364.7
Nextera EnergyNEE29.446.254.9
NvidiaNVDA50.841.874.1
PfizerPFE30.064.545.7
PaypalPYPL32.613.158.1
StarbucksSBUX18.51.464.9
AT&TT20.60.168.2
VerizonVZ18.1473.6
Walgreens Boots AllianceWBA4161.651.3
Wells FargoWFC25.75.572.5
WalmartWMT18.131.525.6
Exxon MobilXOM2415.850.8

Weekly Trade Discussion: Open Positions

*Portfolio updated every Monday
Bear Call Spread: SPY December 15, 2023, 456/461

Original trade published on 11-6-2023 (click to see original alert)

Background: At the time of the trade, SPY was trading for roughly 435.36. We sold the December 15, 2023, SPY 456/461 bear call spread for $0.58. The expected range or move was 419 to 451. The probability of success at the time of the trade was 86.49% on the call side.

Current Thoughts: At the time of the trade SPY was trading for 435.36 and now it sits at 450.79. SPY’s relentless push higher since late October has pushed our probability of success from 86.49% to where it stands now, 62.77%. If we manage to see any decent downside from here, we should be able to get out of our position. Our bear call spread currently sits at $1.72.

Call Side:

COI_QT_112023_SPY_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 November 27, 2023.

Andy Crowder is a professional options trader, researcher and Senior Analyst at Cabot. Formerly with Oppenheimer & Co. in New York, Andy has leveraged his investment experience to develop his statistically based options trading strategy which applies probability theory to option valuations in order to execute risk-controlled trades. This proprietary strategy has been refined through two decades of research and real-world experience and has been featured in the Wall Street Journal, Seeking Alpha, and numerous other financial publications. Andy has helped thousands of option traders learn and implement his meticulous rules-driven options trading strategies through highly attended conferences, one-on-one coaching, webinars, and his work as a financial columnist. He currently resides in Bolton Valley, Vermont and when he’s not trading, teaching and writing about options, he enjoys spending time with his wife and two daughters, backcountry skiing, biking, running and enjoying all things outdoors.