Cabot Options Institute Income Trader – Alert (PFE)
Before I get to our PFE trade, I wanted to let everyone know that, per our income cycle guidelines, we will allow our KO puts and WFC puts to expire today (unless we see a rally today). This means that on Monday we will be put shares of both stocks and begin the process of selling calls on both.
Pfizer (PFE)
PFE is currently trading for 44.09.
IV: 36.01%
IV Rank: 34.9
Expected Move (Range): The expected move for the October 28, 2022, expiration cycle is from roughly 41 to 47.
With PFE trading for 44.09, I want to sell calls at the 47 strike, right at the expected move, going out 35 days for roughly $0.56, if not higher. Of course, due to a wide variety of factors, prices may and most likely will vary slightly.
Here is the trade:
Buy to close PFE October 21, 2022, 50 call for $0.09
Once that occurs (or if you are new to the trade):
Sell to open PFE October 28, 2022, 47 call strike for a total of $0.56 or higher. (As always, prices will vary, please adjust accordingly.)
Delta of short call: 0.25
Probability of Profit: 78.05%
Probability of Touch: 45.25%
Total net credit: $0.56
Max return (cash-secured): 1.1%
Risk Management
We use PFE as part of our Income Wheel Portfolio, so if PFE closes above our call strike at expiration our shares will be called away and, in most cases, we will reap the capital benefits of the stock increase, plus the premium acquired. Until that point, we will repeatedly sell calls on PFE. Of course, any necessary trade alerts/updates will follow.