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Quant Trader
Expert-Level Options for Sophisticated Traders

COI Quant Trader Issue: October 30, 2023

There was little to no value left in the SPY 452/457 bear call spread, so we thought it was best to take our profits off the table and establish another bear call spread to protect our 408/403 bull put spread. One thing is certain: We will have to be nimble as we approach the November 17, 2023, expiration cycle. With only 18 days left until expiration, time decay is working in our favor. A short-term move to the upside, off oversold levels, should allow us to take our bull put spread off for a small profit. A rally should also “hopefully” lower implied volatility in SPY which should help our newly added bear call spread as well. As always, price action will be the final determinate.

Weekly Commentary

Last week, with the market pushing notably lower, we decided to take off our SPY 452/457 bear call spread for nearly a max profit. Our return on the trade: 16.6%. Our total return now stands at 182.4%.

There was little to no value left in the SPY 452/457 bear call spread, so we thought it was best to take our profits off the table and establish another bear call spread to protect our 408/403 bull put spread. One thing is certain: We will have to be nimble as we approach the November 17, 2023, expiration cycle. With only 18 days left until expiration, time decay is working in our favor. A short-term move to the upside, off oversold levels, should allow us to take our bull put spread off for a small profit. A rally should also “hopefully” lower implied volatility in SPY which should help our newly added bear call spread as well. As always, price action will be the final determinate.

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

Current Portfolio

Open DateTickerStrategyTradeOpen PriceCurrent PriceCurrent ProbabilityDelta
10/27/2023SPYBear CallNovember 17, 2023 430/435$0.58 $0.59 86.86%-0.07
10/6/2023SPYBull PutNovember 17, 2023 408/403$0.58 $1.56 58.33%0.09
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%
182.41%

Volatility Talk

Volatility continues to remain just above “normal” levels, but the investor’s fear gauge, otherwise known as the VIX, certainly isn’t screaming fear in the market. Does that mean the recent sell-off is just another “normal” correction? Now that we are back into oversold territory almost across the board, at key support levels with positive seasonality blowing at our backs, is another leg up in the cards? One thing is certain: The VIX isn’t overly concerned, at least not at these levels. It will be interesting to see how the market reacts over the coming week or so and should be telling as to how we wrap up the rest of 2023.

COI_QT_103023_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 October 30, 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 ETFARKK46.839.824.3
Proshares Bitcoin ETFBITO77.433.974.7
SPDR Dow JonesDIA17.547.921.1
iShares MSCI Emerging MarketsEEM19.532.130.2
iShares MSCI EAFEEFA18.744.124.2
iShares MSCI Mexico ETFEWW28.354.850.1
iShares MSCI BrazilEWZ32.51844.9
iShares China Large-CapFXI31.818.245.2
Vaneck Gold MinersGDX36.338.959.1
SPDR Gold GLD17.457.685.7
iShares High-YieldHYG10.339.246.4
iShares Russell 2000IWM25.55525
SPDR Regional BankKRE41.827.537.1
Vaneck Oil ServicesOIH36.635.925.4
Invesco Nasdaq 100QQQ25.147.627.6
iShares Silver TrustSLV29.745.263.3
Vaneck SemiconductorSMH35.360.429.9
SPDR S&P 500 SPY 21.156.820.9
iShares 20+ Treasury BondTLT23.874.845.1
United States Oil FundUSO46.074.250
Proshares Ultra VIX ShortUVXY133.860.865.4
CBOE Market Volatility IndexVIX104.462.163.1
Barclays S&P 500 VIX ETNVXX91.960.566
SPDR BiotechXLB21.643.135.9
SPDR Energy Select XLE27.837.222.3
SPDR FinancialsXLF23.736.420.4
SPDR UtilitiesXLU22.858.847.1
SPDR S&P Oil & Gas ExplorerXOP33.132.531.6
SPDR Retail XRT27.735.332.9

Stock Watch List – Trade Ideas

Stock - Quant TraderTicker Symbol IVIV Rank HPMR Oversold - Overbought
AppleAAPL31.544.929.4
Bank of AmericaBAC34.435.335.3
Bristol-Myers SquibbBMY25.781.837.4
CitigroupC31.022.127.6
CaterpillarCAT40.689.921.4
ComcastCMCSA31.142.928.9
CostcoCOST23.943.631.3
Cisco SystemsCSCO30.356.230.4
ChevronCVX27.844.852.6
DisneyDIS38.146.940.5
Duke EnergyDUK28.775.636.7
FedexFDX29.631.923.4
Gilead SciencesGILD30.978.252.7
General MotorsGM46.161.736.2
IntelINTC49.663.931.5
Johnson & JohnsonJNJ21.466.929.4
JP MorganJPM25.828.430.2
Coca-ColaKO22.661.656.6
Altria GroupMO24.049.052.3
MerckMRK28.289.845.6
Morgan StanleyMS29.531.224
MicrosoftMSFT33.860.946.3
Nextera EnergyNEE41.594.034.6
NvidiaNVDA49.838.226.9
PfizerPFE33.189.124.1
PaypalPYPL57.654.522.2
StarbucksSBUX36.66262
AT&TT28.13667.9
VerizonVZ30.472.450.8
Walgreens Boots AllianceWBA44.670.537.1
Wells FargoWFC32.42542.2
WalmartWMT2556.240.1
Exxon MobilXOM30.549.248.1

Weekly Trade Discussion: Open Positions

*Portfolio updated every Monday
Bear Call: SPY November 17, 2023, 430/435

Original trade published on 10-27-2023 (click to see original alert)

Background: At the time of the trade, SPY was trading for roughly 410.78. We sold the November 17, 2023, SPY 430/435 bear call spread for $0.58. The expected range or move was 396 to 426. The probability of success at the time of the trade was 86.76% and the probability of touch was 26.03%.

Current Thoughts: At the time of the trade, SPY was trading for 410.78 and now it sits at 410.68. Admittedly, we are early in the trade, but our probability sits at a comfortable 86.88% on the call side. This trade was added to protect any additional downside over the next week or so.

Call Side:

COI_QT_103023_SPY_bearcall.png

Bull Put: SPY November 17, 2023, 408/403

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 410.68. Our probability sits at 58.22% on the put side. The current price of our bull put spread is $1.56 which is reasonably close to our stop-loss of $1.74. Obviously, a move to the upside will help to push the position back into positive territory, but given how close we are to our stop-loss we need to stay nimble just in case the current downside trend continues.

Put Side:

COI_QT_103023_SPY_bullput.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 6, 2023.

Andy Crowder is a professional options trader, researcher and Chief Analyst of Cabot Options Institute. 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.