Cabot Options Institute Income Trader: Alert (PFE, BITO, GDX, KO)
I’m selling calls against our newly assigned shares today, per our Income Wheel strategy. I will be sending out another alert shortly to sell calls against our GDX and KO positions.
Pfizer (PFE)
As part of the Income Wheel approach, we allowed our PFE puts to expire in the money at expiration last week. As a result, we were issued shares at our chosen put strike of 37.5.
Today, as our Income Wheel strategy states, we are going to sell calls against our newly issued shares in PFE.
We are not selling naked calls, so you need to have at least 100 shares if you wish to enter a new position in PFE. For those of you that are new to Income Trader and wish to follow along with PFE, buying at least 100 shares of PFE for every call contract you wish to sell is required as we are in the covered call phase of the Income Wheel strategy for PFE.
PFE is currently trading for 37.09.
Here is the trade:
Sell to Open PFE September 29, 2023, 38 (covered) call for $0.78 (adjust accordingly, prices may vary from time of alert).
Delta of short call: 0.40
Probability of Profit: 63.18%
Probability of Touch: 75.11%
Total net credit: $0.78
Max return (cash-secured): 2.1%
Bitcoin (BITO)
As part of the Income Wheel approach, we allowed our BITO puts to expire in the money at expiration last week. As a result, we were issued shares at our chosen put strike of 15.
Today, as our Income Wheel strategy states, we are going to sell calls against our newly issued shares in BITO.
We are not selling naked calls, so you need to have at least 100 shares if you wish to enter a new position in BITO. For those of you that are new to Income Trader and wish to follow along with BITO, buying at least 100 shares of BITO for every call contract you wish to sell is required as we are in the covered call phase of the Income Wheel strategy for BITO.
BITO is currently trading for 13.41.
Here is the trade:
Sell to Open BITO September 29, 2023, 14 (covered) call for $0.48 (adjust accordingly, prices may vary from time of alert).
Delta of short call: 0.36
Probability of Profit: 70.14%
Probability of Touch: 73.98%
Total net credit: $0.48
Max return (cash-secured): 3.4%
Gold Miners ETF (GDX)
We allowed our calls to expire worthless, thereby reaping all of the call premium. Now it’s time to start selling more call premium.
GDX is currently trading for 27.61.
Here is the trade (we are not selling naked calls; you must own at least 100 shares of GDX before placing the trade):
Sell to Open GDX October 20, 2023, 29 (covered) call for $0.86 (adjust accordingly, prices may vary from time of alert).
Delta of short call: 0.38
Probability of Profit: 66.38%
Probability of Touch: 68.01%
Total net credit: $0.86
Max return (cash-secured): 3.1%
Risk Management
We use GDX as part of our Income Wheel Portfolio, so if GDX 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 GDX.
Coca-Cola (KO)
Like GDX, we allowed our calls to expire worthless, thereby reaping all of the call premium. Now it’s time to start selling more call premium.
KO is currently trading for 60.42.
Here is the trade (we are not selling naked calls; you must own at least 100 shares of KO before placing the trade):
Sell to Open KO September 29, 2023, 61 (covered) call for $0.78 (adjust accordingly, prices may vary from time of alert).
Delta of short call: 0.44
Probability of Profit: 57.77%
Probability of Touch: 82.25%
Total net credit: $0.78
Max return (cash-secured): 1.3%
Risk Management
We use KO as part of our Income Wheel Portfolio, so if KO 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 KO.
As always, if you have any questions, please feel free to email me at andy@cabotwealth.com.
