Weekly Commentary
Last week the market extended the recent rally. The move higher pushed the major indexes into a short-term overbought state while the VIX has, not surprisingly, moved into a short-term oversold state. Typically, when we see this type of short-term extreme hit the market a reprieve is right around the corner.
I had intended on adding a new position to the mix last week, but after coming down with my first case of Covid, I was down and out for a few days with little energy for adding new positions. However, now that I’m back in action I fully plan on adding several new positions to the portfolio this week, most likely over the next two days. Stay tuned for the alert.
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 |
| 8/17/2023 | SPY | Iron Condor | October 20, 2023 475/470 - 390/385 | $0.70 | $0.67 | 85.08% - 96.02% | -0.07 |
| 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% |
| 146.02% |
Volatility Talk
Volatility took a dive last week and is now back at the bottom of the trading range we’ve seen since June. As you could expect, what follows a steep decline over a short time frame is a short-term oversold state. Given the short-term oversold state in the VIX and the numerous underlying stocks and ETFs that have negative IV ranks, I would not be surprised to see a short-term reprieve over the next few weeks.
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 5, 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 | 35.1 | 6 | 62.7 |
| ProShares Bitcoin ETF | BITO | 44.8 | 5 | 33.7 |
| SPDR Dow Jones | DIA | 11.5 | -0.9 | 57.7 |
| iShares MSCI Emerging Markets | EEM | 15.8 | 9.4 | 57.8 |
| iShares MSCI EAFE | EFA | 13.5 | 7.1 | 56.1 |
| iShares MSCI Mexico ETF | EWW | 23.3 | 26.8 | 36.9 |
| iShares MSCI Brazil | EWZ | 27.4 | 3.1 | 50.2 |
| iShares China Large-Cap | FXI | 29.7 | 7.2 | 62.7 |
| VanEck Gold Miners | GDX | 26.8 | -1.4 | 54 |
| SPDR Gold | GLD | 11.1 | -1.2 | 72.2 |
| iShares High-Yield | HYG | 7.3 | 4.5 | 57.8 |
| iShares Russell 2000 | IWM | 17.2 | -1.9 | 68 |
| SPDR Regional Bank | KRE | 28.5 | 7.4 | 61.9 |
| VanEck Oil Services | OIH | 26.1 | -0.5 | 73.6 |
| Invesco Nasdaq 100 | QQQ | 18.6 | -0.9 | 67.9 |
| iShares Silver Trust | SLV | 23.1 | 1.6 | 56.1 |
| VanEck Semiconductor | SMH | 26.4 | 6.1 | 67 |
| SPDR S&P 500 | SPY | 13.2 | -0.2 | 67.1 |
| iShares 20+ Treasury Bond | TLT | 16.4 | 17.2 | 43.8 |
| United States Oil Fund | USO | 27.0 | 5.1 | 82.7 |
| ProShares Ultra VIX Short | UVXY | 92.0 | 6.5 | 23.5 |
| CBOE Market Volatility Index | VIX | 78.5 | -5 | 25.4 |
| Barclays S&P 500 VIX ETN | VXX | 62.4 | 7.9 | 23.6 |
| SPDR Biotech | XLB | 13.8 | 8.6 | 78.3 |
| SPDR Energy Select | XLE | 20.0 | -2.3 | 76.9 |
| SPDR Financials | XLF | 15.2 | 2.9 | 65 |
| SPDR Utilities | XLU | 15.1 | 5.6 | 29.8 |
| SPDR S&P Oil & Gas Explorer | XOP | 24.7 | -3.3 | 78.3 |
| SPDR Retail | XRT | 20.5 | 8.3 | 58.7 |
Stock Watch List – Trade Ideas
| Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought | |
| Apple | AAPL | 20.9 | 3.3 | 75.1 |
| Bank of America | BAC | 22.6 | -1.5 | 45.1 |
| Bristol-Myers Squibb | BMY | 18.0 | 6.1 | 51.9 |
| Citigroup | C | 23.5 | 1 | 38.4 |
| Caterpillar | CAT | 21.6 | -3.6 | 72.1 |
| Comcast | CMCSA | 20.8 | 2.4 | 44.2 |
| Costco | COST | 20.6 | 19.7 | 49.6 |
| Cisco Systems | CSCO | 15.4 | 2 | 84.3 |
| Chevron | CVX | 18.9 | -3.7 | 74.5 |
| Disney | DIS | 27.3 | 9.7 | 24.8 |
| Duke Energy | DUK | 19.1 | 5.2 | 25.2 |
| FedEx | FDX | 31.3 | 24.6 | 47.5 |
| Gilead Sciences | GILD | 21.4 | -3.3 | 42.8 |
| General Motors | GM | 31.0 | 7 | 47.1 |
| Intel | INTC | 33.8 | 8 | 75.1 |
| Johnson & Johnson | JNJ | 17.9 | 25 | 18.8 |
| JPMorgan | JPM | 19.7 | 9.6 | 35.7 |
| Coca-Cola | KO | 13.4 | 8.6 | 23.1 |
| Altria Group | MO | 15.9 | 6.3 | 59.3 |
| Merck | MRK | 18.0 | -2.7 | 54.6 |
| Morgan Stanley | MS | 20.5 | 0.5 | 57.2 |
| Microsoft | MSFT | 22.1 | 6.6 | 60.4 |
| NextEra Energy | NEE | 19.5 | -2.1 | 33.6 |
| Nvidia | NVDA | 40.5 | -0.3 | 63.1 |
| Pfizer | PFE | 20.6 | 6.3 | 42.8 |
| PayPal | PYPL | 29.5 | -1.3 | 60.1 |
| Starbucks | SBUX | 18.9 | -1.4 | 51.3 |
| AT&T | T | 20.3 | 6.2 | 63.9 |
| Verizon | VZ | 18.8 | 8.1 | 78.1 |
| Walgreens Boots Alliance | WBA | 31.6 | 22.8 | 10.3 |
| Wells Fargo | WFC | 23.7 | 0.5 | 40.4 |
| Walmart | WMT | 14 | 1.7 | 63.8 |
| Exxon Mobil | XOM | 20 | -2.5 | 75.7 |
Weekly Trade Discussion: Open Positions
*Portfolio updated every Monday
Iron Condor: SPY October 20, 2023, 385/390 – 470/475 calls
Original trade published on 8-17-2023 (click to see original alert)
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 451.19. Even though SPY has rallied since we added the trade the drop in implied volatility has counteracted the move. Our probabilities sit at 85.35% on the call side and 96.00% on the put side. We could buy back the iron condor for $0.67, just below where we sold the trade at $0.70. I’m seeking gains of at least 8% to 10%, if not more. Our max profit on the trade is 16.3%.
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 11, 2023.