COI Quant Trader Issue: September 11, 2023

Weekly Commentary

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We added another trade to the mix this past week and thankfully, at least so far, both trades are in profitable territory. We have the ability to take our SPY iron condor off the table for just over 8% and with 40 days left until expiration, it might not be a bad decision to lock in those profits. As for our IWM iron condor, we are early in the trade, and even though we have a chance to lock in some early profits, those profits are minuscule at the moment, so we will continue to hold in hopes of taking the trade off the table (for profits) over the next two to three weeks. Our total profits are just over 150% and the hope is we can add another 15% to 20% prior to the next expiration cycle.

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

Current Portfolio

Volatility Talk

Volatility made a brief appearance early in the week only to fall back to close the week at 13.84. As we move into the middle part of the month, the seasonality for the S&P 500 is overwhelmingly bearish. Does that mean a bearish move is on the horizon? Of course not. But it is something that we should consider if we do see a continued push lower over the next week or so, as it could afford us a nice opportunity to add a trade or two to the mix.

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 September 11, 2023.

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

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

Stock Watch List – Trade Ideas

Weekly Trade Discussion: Open Positions

*Portfolio updated every Monday

Background: At the time of the trade, SPY was trading for 440. We sold the October 20, 2023, SPY 385/390 – 470/475 iron condor for $0.70. The expected range or move was 418 to 462.

Current Thoughts: Several weeks into our SPY iron condor and the trade is sitting at breakeven. At the time of the trade SPY was trading for 440 on the nose and now it sits at 445.52. Even though SPY has rallied since we added the trade, the drop in implied volatility has counteracted the move. Our probabilities sit at 93.39% on the call side and 95.97% on the put side. We could buy back the iron condor for $0.32, less than half of what we sold it for back on August 17. I’m seeking gains of at least 8% to 10%, if not more. We can currently take a profit of 8.2%, so we are within our profit target range. Our max profit on the trade is 16.3%.

Call Side:

Put Side:

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: A week into our IWM iron condor and the trade is sitting at $0.51. At the time of the trade IWM was trading for 185.75 and now it sits at 183.92. Our probabilities sit at 93.04% on the call side and 87.24% on the put side. We could buy back the iron condor for $0.51, just below where we sold the trade at $0.62. 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:

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 September 18, 2023.