Weekly Commentary
As I stated last week, volatility has once again made an appearance. However, as we have all seen over the past few months, sightings have been rare and, more annoyingly, fleeting. If volatility and in turn IV ranks are able to stay at current levels or potentially rise a little, we should begin to see opportunities pick up. As always, my goal is to have three to five open trades at any given time. With IV ranks low across the board the past few months, we’ve remained patient and kept our powder dry. But all of that is quickly changing, at least for the moment. If volatility continues to trade around these levels expect to see a few additional trades. As it stands, we have two open trades, one of which we opened late last week and thankfully, both trades look good at the moment.
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 |
| 9/6/2023 | IWM | Iron Condor | October 20, 2023 204/199 - 169/164 | $0.62 | $0.51 | 98.99% - 80.96% | 0.1 |
| 9/29/2023 | SPY | Bear Call | November 17, 2023 452/457 | $0.74 | $0.73 | 85.81% | -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% |
| 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% |
Volatility Talk
The S&P 500 closed the week essentially where it opened the week. But the similar close from the prior week didn’t stop the ongoing see-saw action of the VIX. The VIX, for the first time since late May, pushed above 19.50 (intraday) only to close the week at 17.52. As I stated last week, the 18 handle has acted as stubborn overhead resistance over the past few months so it will be interesting to see if the VIX can push through that level over the near-term. If so, more and more opportunities to sell options premium should present themselves.
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 2, 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 | 38.4 | 16.8 | 40 |
| Proshares Bitcoin ETF | BITO | 40.9 | 0.9 | 56.9 |
| SPDR Dow Jones | DIA | 14.3 | 22 | 22.3 |
| iShares MSCI Emerging Markets | EEM | 17.7 | 23.7 | 35.1 |
| iShares MSCI EAFE | EFA | 15.6 | 23.4 | 31.6 |
| iShares MSCI Mexico ETF | EWW | 24.3 | 33.8 | 31.7 |
| iShares MSCI Brazil | EWZ | 29.2 | 9.8 | 41.7 |
| iShares China Large-Cap | FXI | 30.5 | 11.3 | 44.8 |
| Vaneck Gold Miners | GDX | 31.3 | 24.7 | 21.8 |
| SPDR Gold | GLD | 12.8 | 20.2 | 13.8 |
| iShares High-Yield | HYG | 8.6 | 20.3 | 36 |
| iShares Russell 2000 | IWM | 20.8 | 21.2 | 37 |
| SPDR Regional Bank | KRE | 33.1 | 15.3 | 45.6 |
| Vaneck Oil Services | OIH | 32.9 | 20.8 | 41.4 |
| Invesco Nasdaq 100 | QQQ | 21.8 | 20.4 | 37.3 |
| iShares Silver Trust | SLV | 26.4 | 21.3 | 23.6 |
| Vaneck Semiconductor | SMH | 28.5 | 17.1 | 50.1 |
| SPDR S&P 500 | SPY | 17.1 | 22.6 | 28.9 |
| iShares 20+ Treasury Bond | TLT | 20.7 | 39.4 | 23.8 |
| United States Oil Fund | USO | 31.4 | 19.7 | 53.6 |
| Proshares Ultra VIX Short | UVXY | 116.5 | 39.7 | 56.3 |
| CBOE Market Volatility Index | VIX | 95.2 | 20.4 | 61 |
| Barclays S&P 500 VIX ETN | VXX | 80.3 | 41.2 | 57.2 |
| SPDR Biotech | XLB | 19.0 | 17.7 | 36.7 |
| SPDR Energy Select | XLE | 24.6 | 19.6 | 45.8 |
| SPDR Financials | XLF | 19.3 | 21.7 | 25.8 |
| SPDR Utilities | XLU | 20.6 | 32.4 | 13.5 |
| SPDR S&P Oil & Gas Explorer | XOP | 30.3 | 17.9 | 49.3 |
| SPDR Retail | XRT | 23.9 | 16.3 | 52.8 |
Stock Watch List – Trade Ideas
| Stock - Quant Trader | Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought |
| Apple | AAPL | 27.4 | 27.7 | 39.7 |
| Bank of America | BAC | 33.2 | 31.2 | 23.4 |
| Bristol-Myers Squibb | BMY | 23.8 | 42 | 34.7 |
| Citigroup | C | 32.9 | 28.8 | 31.3 |
| Caterpillar | CAT | 31.0 | 40.1 | 35.2 |
| Comcast | CMCSA | 30.6 | 32.7 | 44.7 |
| Costco | COST | 19.6 | 20.2 | 52.9 |
| Cisco Systems | CSCO | 18.7 | 13.2 | 18.8 |
| Chevron | CVX | 23.1 | 18.9 | 54.3 |
| Disney | DIS | 27.6 | 13.8 | 35.4 |
| Duke Energy | DUK | 24.0 | 33.6 | 53.9 |
| Fedex | FDX | 24.1 | 11.3 | 64 |
| Gilead Sciences | GILD | 34.3 | 53.4 | 35 |
| General Motors | GM | 40.4 | 36.8 | 36.3 |
| Intel | INTC | 44.5 | 42.5 | 22.9 |
| Johnson & Johnson | JNJ | 21.4 | 55.9 | 35.9 |
| JP Morgan | JPM | 26.9 | 33 | 35.7 |
| Coca-Cola | KO | 18.7 | 34 | 30.2 |
| Altria Group | MO | 20.4 | 29.1 | 20.4 |
| Merck | MRK | 24.1 | 49.7 | 32.8 |
| Morgan Stanley | MS | 30.3 | 35.8 | 30.5 |
| Microsoft | MSFT | 30.3 | 40.7 | 26.2 |
| Nextera Energy | NEE | 29.6 | 44.9 | 50.9 |
| Nvidia | NVDA | 40.4 | 7.6 | 25 |
| Pfizer | PFE | 26.2 | 39.3 | 18.4 |
| Paypal | PYPL | 39.7 | 22.3 | 22.2 |
| Starbucks | SBUX | 25.9 | 26.3 | 31.9 |
| AT&T | T | 30.9 | 51.2 | 55.7 |
| Verizon | VZ | 27.6 | 44.4 | 35.7 |
| Walgreens Boots Alliance | WBA | 48.7 | 82.4 | 18.8 |
| Wells Fargo | WFC | 33.7 | 29.1 | 33.5 |
| Walmart | WMT | 17.7 | 20.3 | 44 |
| Exxon Mobil | XOM | 25.3 | 23.1 | 47.2 |
Weekly Trade Discussion: Open Positions
*Portfolio updated every Monday
Iron Condor: IWM October 20, 2023, 164/169 – 199/204 calls
Original trade published on 9-6-2023 (click to see original alert)
Background: At the time of the trade, IWM was trading for 185.75. We sold the October 20, 2023, IWM 164/169 – 199/204 iron condor for $0.62. The expected range or move was 177 to 194.
Current Thoughts: At the time of the trade IWM was trading for 185.75 and now it sits at 176.74. Our probabilities sit at a comfortable 98.94% on the call side and a less comfortable 82.18% on the put side. We could buy back the iron condor for $0.51, slightly less than the $0.62 we sold the spread for roughly 25 days ago. We could buy back the iron condor for a slight profit. Obviously, a move to the upside will help to increase the probabilities on the trade and allow our position to move further into profitable territory. I’m seeking gains of at least 7% to 9%, if not more. Our max profit on the trade is 14.2%.
Call Side:
Put Side:
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 427.48. Our probability sits at a comfortable 84.83% on the call side. We could buy back the iron condor for $0.73, right where we sold the spread for just a few days ago. A move to the downside will help to increase the probabilities on the trade and allow our position to move into profitable territory. 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.
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 October 9, 2023.