Weekly Commentary
We thankfully managed to lock in a return on our October 20, 2023, IWM iron condor. After being tested to the upside and downside over the past month, we were finally given an opportunity to take some profits off the table. We sold the spread for $0.62 and bought it back for $0.19, for a 12.0% return. The trade pushed our total returns to over 165% and our win rate to 87.5% (35/40 winning trades). Fortunately, the portfolio now sits at all-time highs with real potential to increase our returns as we head into the November expiration cycle.
If you have any questions, please do not hesitate to email me at andy@cabotwealth.com.
Current Portfolio
| Open Date | Ticker | Strategy | Trade | Open Price | Current Price | Current Probability | Delta |
| 9/29/2023 | SPY | Bear Call | November 17, 2023 452/457 | $0.74 | $0.63 | 86.65% | -0.06 |
| 10/6/2023 | SPY | Bull Put | November 17, 2023 408/403 | $0.58 | $0.53 | 80.75% | 0.04 |
| 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% |
| 6/15/2023 | 6/22/2023 | SPY | Bear Call Spread | August 18, 2023 465/470 | $0.70 | $0.24 | 10.13% |
| 5/26/2023 | 6/23/2023 | IWM | Iron Condor | July 21, 2023 191/196 - 156/151 | $0.79 | $0.50 | 6.15% |
| 5/31/2023 | 7/12/2023 | QQQ | Bear Call Spread | July 21, 2023 375/380 | $0.60 | $1.80 | -31.60% |
| 6/30/2023 | 8/7/2023 | SPY | Bear Call Spread | August 18, 2023 462/466 | $0.52 | $0.23 | 7.82% |
| 8/4/2023 | 8/11/2023 | SPY | Bear Call Spread | September 15, 2023 470/475 | $0.65 | $0.20 | 9.90% |
| 8/17/2023 | 9/13/2023 | SPY | Iron Condor | October 20, 2023 475/470 - 390/385 | $0.72 | $0.25 | 10.38% |
| 9/6/2023 | 10/11/2023 | IWM | Iron Condor | October 20, 2023 204/199 - 169/164 | $0.62 | $0.19 | 9.41% |
| 165.81% |
Volatility Talk
Last week I stated, “The VIX continues to bounce between 17.5 and 20, with the 20 level acting as very strong overhead resistance. My hope is that volatility continues to trade around these levels so opportunities to sell premium are more abundant.” Well, as you can see from the chart of the VIX below, the market pushed back to the 20 level only to be rejected immediately. One thing is certain: Volatility is back! IV ranks have finally pushed higher, which has led to an increase in options premium across the board, and more importantly, an increase in trading opportunities.
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 October 16, 2023.
Here are the various levels I use to determine if an ETF is in an oversold or overbought state.
| Very Overbought | a reading greater than or equal to 80.0 |
| Overbought | greater than or equal to 60.0 |
| Neutral | between 40 to 60 |
| Oversold | less than or equal 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
| Exchange Traded Fund | Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought |
| ARK Innovation ETF | ARKK | 41.9 | 22.7 | 31.5 |
| Proshares Bitcoin ETF | BITO | 40.8 | 5.8 | 41.2 |
| SPDR Dow Jones | DIA | 15.8 | 32 | 51.5 |
| iShares MSCI Emerging Markets | EEM | 19.6 | 25.5 | 47.1 |
| iShares MSCI EAFE | EFA | 18.1 | 36.3 | 42.5 |
| iShares MSCI Mexico ETF | EWW | 29.0 | 66.7 | 35.4 |
| iShares MSCI Brazil | EWZ | 31.0 | 12.1 | 50.2 |
| iShares China Large-Cap | FXI | 30.2 | 17.1 | 49.9 |
| Vaneck Gold Miners | GDX | 35.6 | 35.5 | 68.9 |
| SPDR Gold | GLD | 14.7 | 68.6 | 76.2 |
| iShares High-Yield | HYG | 10.4 | 23.9 | 36.8 |
| iShares Russell 2000 | IWM | 23.0 | 38.8 | 30.2 |
| SPDR Regional Bank | KRE | 37.6 | 22.1 | 35.8 |
| Vaneck Oil Services | OIH | 37.7 | 30.4 | 58.1 |
| Invesco Nasdaq 100 | QQQ | 23.2 | 29.2 | 50.9 |
| iShares Silver Trust | SLV | 30.8 | 49 | 64.9 |
| Vaneck Semiconductor | SMH | 31.3 | 29.5 | 52.2 |
| SPDR S&P 500 | SPY | 18.4 | 36 | 49.3 |
| iShares 20+ Treasury Bond | TLT | 25.3 | 56.2 | 50.4 |
| United States Oil Fund | USO | 38.1 | 66.5 | 58.6 |
| Proshares Ultra VIX Short | UVXY | 116.4 | 80.6 | 66.3 |
| CBOE Market Volatility Index | VIX | 102.1 | 57.4 | 67.1 |
| Barclays S&P 500 VIX ETN | VXX | 80.0 | 78.3 | 39.7 |
| SPDR Biotech | XLB | 20.9 | 24.6 | 39.7 |
| SPDR Energy Select | XLE | 27.9 | 31.8 | 58.1 |
| SPDR Financials | XLF | 21.9 | 29.8 | 48.9 |
| SPDR Utilities | XLU | 25.1 | 49.9 | 53.5 |
| SPDR S&P Oil & Gas Explorer | XOP | 34.6 | 28.7 | 64.9 |
| SPDR Retail | XRT | 25.7 | 27.4 | 36.9 |
Stock Watch List – Trade Ideas
| Stock - Quant Trader | Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought |
| Apple | AAPL | 29.1 | 37.2 | 59.4 |
| Bank of America | BAC | 38.8 | 42.8 | 45.8 |
| Bristol-Myers Squibb | BMY | 25.3 | 60.6 | 32.6 |
| Citigroup | C | 36.8 | 23.5 | 60.6 |
| Caterpillar | CAT | 36.9 | 69.8 | 42.4 |
| Comcast | CMCSA | 29.4 | 33.2 | 42.3 |
| Costco | COST | 22.7 | 26.8 | 56.3 |
| Cisco Systems | CSCO | 19.8 | 28.6 | 47.5 |
| Chevron | CVX | 26.8 | 36.2 | 47.6 |
| Disney | DIS | 35.0 | 41.2 | 64.3 |
| Duke Energy | DUK | 28.7 | 65.1 | 50.4 |
| Fedex | FDX | 26.7 | 25.3 | 16.2 |
| Gilead Sciences | GILD | 31.2 | 63.9 | 75.3 |
| General Motors | GM | 44.6 | 49.6 | 25.5 |
| Intel | INTC | 45.6 | 54.4 | 47.4 |
| Johnson & Johnson | JNJ | 22.0 | 76.1 | 43.3 |
| JP Morgan | JPM | 28.4 | 23.9 | 67.7 |
| Coca-Cola | KO | 25.9 | 67.1 | 31.1 |
| Altria Group | MO | 23.7 | 48.2 | 58.1 |
| Merck | MRK | 24.9 | 65.8 | 49.7 |
| Morgan Stanley | MS | 33.8 | 48.2 | 26.2 |
| Microsoft | MSFT | 31.5 | 65.8 | 55.6 |
| Nextera Energy | NEE | 43.4 | 96.6 | 49.1 |
| Nvidia | NVDA | 42.1 | 13.7 | 53.4 |
| Pfizer | PFE | 32.7 | 88.6 | 25.9 |
| Paypal | PYPL | 54.1 | 48.1 | 27.4 |
| Starbucks | SBUX | 34.8 | 59.1 | 40.8 |
| AT&T | T | 33 | 62.1 | 35.6 |
| Verizon | VZ | 31.4 | 70.6 | 28.4 |
| Walgreens Boots Alliance | WBA | 50.3 | 57.8 | 60.4 |
| Wells Fargo | WFC | 38.1 | 23.9 | 64.9 |
| Walmart | WMT | 22.2 | 35.1 | 53.6 |
| Exxon Mobil | XOM | 29.8 | 42.1 | 45.2 |
Weekly Trade Discussion: Open Positions
*Portfolio updated every Monday
Bear Call: SPY November 17, 2023, 452/457
Original trade published on 9-29-2023 (click to see original alert)
Background: At the time of the trade, SPY was trading for roughly 428. We sold the November 17, 2023, SPY 452/457 bear call spread for $0.74. The expected range or move was 410 to 448. The probability of success at the time of the trade was 84.92% and the probability of touch was 28.93%.
Current Thoughts: At the time of the trade SPY was trading for 428.34 and now it sits at 431.50. Our probability sits at a comfortable 85.81% on the call side. Early on in the trade, a move to the downside will obviously help to increase the probabilities on the trade while time decay works its magic in the background, slowly eating away at the options premium of the trade. If I have an opportunity to buy back the spread early for roughly $0.35, I will do so and move on to the next opportunity. The bear call spread is currently trading for $0.64.
Call Side:
Bull Put: SPY November 17, 2023, 452/457
Original trade published on 10-6-2023 (click to see original alert)
Background: At the time of the trade, SPY was trading for 429.69. We sold the November 17, 2023, SPY 408/403 bull put spread for $0.58. The expected range or move was 412 to 448. The probability of success at the time of the trade was 80.50% and the probability of touch was 39.82%.
Current Thoughts: At the time of the trade, SPY was trading for 429.69 and now it sits at 431.50. Our probability sits at 81.55% on the put side. If I have an opportunity to buy back the spread early for roughly $0.25, I will do so and move on to the next opportunity. The current price of our bull put spread is $0.55.
Additionally, by adding the bull put spread to the mix we essentially have an iron condor position on when combining our previous SPY bear call spread at the 452/457 call strikes. Our total combined premium in SPY for the November 17, 2023 expiration cycle stands at $1.32 for a potential return of roughly 35%.
Put 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 October 23, 2023.
