The ongoing market rally has made it incredibly easy for all of our positions. We are seeing nice profits in almost every position, with PFE being the exception as it’s slightly below its break-even.
We will need to roll the remainder of our August positions (BITO, GDX) into September next week and if we do see a short-term pullback, I plan on adding a few more positions to the mix. If GDX and BITO manage to keep climbing and close above their short call strikes we could be in for some nice 20%+ winners. If not, no worries, we will continue to sell calls and lock in profits along the way.
Cabot Options Institute – Income Trader Issue: August 12, 2022
The ongoing market rally has made it incredibly easy for all of our positions. We are seeing nice profits in almost every position, with PFE being the exception as it’s slightly below its break-even.
We will need to roll the remainder of our August positions (BITO, GDX) into September next week and if we do see a short-term pullback, I plan on adding a few more positions to the mix. If GDX and BITO manage to keep climbing and close above their short call strikes we could be in for some nice 20%+ winners. If not, no worries, we will continue to sell calls and lock in profits along the way.
Our short-term trade in JPM is also going well. We can lock in roughly $1 worth of premium after only two weeks into the trade. Given the trade isn’t due to expire for another 36 days I’m going to take off the trade next week and possibly sell more premium in the big bank. As I said before, my hope is that we see a short-term pullback so I can initiate a few more short-term income trades.
Current Positions
| Income Wheel Portfolio - Open Trades | ||||||||
| 7/11/2022 | PFE | $53.35 | $48.29 | Short Put | August 19, 2022 50 Put | $1.00 | $0.77 | 0.82 |
| 7/18/2022 | BITO | $13.11 | $14.98 | Covered Call | August 19, 2022 16 Call | $0.50 | $0.23 | 0.77 |
| 7/18/2022 | GDX | $25.59 | $26.62 | Covered Call | August 19 2022, 28 Call | $0.63 | $0.20 | 0.23 |
| 8/10/2022 | KO | $63.15 | $63.22 | Short Put | September 23, 2022 60 Put | $0.62 | $0.54 | 0.21 |
| 8/10/2022 | WFC | $44.48 | $45.25 | Short Put | September 23, 2022 41 Put | $0.61 | $0.50 | 0.21 |
| Income Trades - Open Trades | ||||||||
| 7/26/2022 | JPM | $113.76 | $120.14 | Short Put | September 16, 2022 100 Put | $1.22 | $0.29 | 0.05 |
| Open Date | Close Date | Ticker | Strategy | Trade | Open Price | Closed Price | Profit | Return |
| Income Wheel Portfolio - Closed Trades | ||||||||
| 6/3/2022 | 7/8/2022 | PFE | Short Put | July 8, 2022 50 Put | $0.65 | $0.00 | $0.65 | 1.30% |
| 6/10/2022 | 7/15/2022 | GDX | Short Put | July 15, 2022 29 Put | $0.66 | Assigned at $29 | ($2.75) | -9.48% |
| 6/10/2022 | 7/15/2022 | BITO | Short Put | July 15, 2022 16 Put | $0.82 | Assigned at $16 | ($2.09) | -13.10% |
| 6/22/2022 | 7/21/2022 | WFC | Short Put | July 29, 2022 35 Put | $0.80 | $0.02 | $0.78 | 2.23% |
| 6/30/2022 | 8/10/2022 | KO | Short Put | August 19, 2022 57.5 Put | $0.70 | $0.03 | $0.67 | 1.20% |
| 7/21/2022 | 8/10/2022 | WFC | Shotr Put | August 19, 2022 39 Put | $0.46 | $0.04 | $0.42 | 1.08% |
Here are the various levels I use to determine if an ETF is in an oversold or overbought state.
| Very Overbought | greater than or equal to 80.1 |
| Overbought | 60.1 to 80.0 |
| Neutral | 40.1 to 60 |
| Oversold | 20.1 to 40.0 |
| Very Oversold | less than or equal to 20.0 |
ETF Watchlist
| Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought | |
| ARK Innovation ETF | ARKK | 55.8 | 45.6 | 56.7 |
| ProShares Bitcoin ETF | BITO | 77 | 19.2 | 61.7 |
| iShares MSCI Emerging Markets | EEM | 20 | 18.4 | 70.4 |
| iShares MSCI EAFE | EFA | 21.7 | 25.4 | 68.5 |
| iShares MSCI Mexico ETF | EWW | 23.7 | 15.1 | 70.4 |
| iShares MSCI Brazil | EWZ | 35.8 | 52.4 | 73.9 |
| iShares China Large-Cap | FXI | 30.1 | 14.2 | 43.6 |
| VanEck Gold Miners | GDX | 39.5 | 57.1 | 54.1 |
| SPDR Gold | GLD | 16.1 | 7.9 | 60.7 |
| iShares High-Yield | HYG | 13.2 | 39.6 | 58.2 |
| SPDR Regional Bank | KRE | 30.4 | 9.8 | 83.2 |
| iShares Silver Trust | SLV | 29.1 | 13.2 | 55.9 |
| iShares 20+ Treasury Bond | TLT | 18.5 | 33.6 | 34.6 |
| United States Oil Fund | USO | 42.3 | 24.2 | 59.4 |
| ProShares Ultra VIX Short | UVXY | 108.2 | 13.5 | 23.4 |
| Barclays S&P 500 VIX ETN | VXX | 58.6 | 14.1 | 50.8 |
| SPDR Biotech | XLB | 22.3 | 35.3 | 77.9 |
| SPDR Energy Select | XLE | 47.1 | 32.6 | 68.2 |
| SPDR Financials | XLF | 21.5 | 21.9 | 8.5 |
| SPDR Utilities | XLU | 23.6 | 28.6 | 84.5 |
| SPDR Retail | XRT | 34.5 | 48 | 71.1 |
Stock Watchlist
| Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought | |
| Bank of America | BAC | 29.9 | 23.1 | 76.9 |
| Bristol-Myers | BMY | 24.3 | 28.5 | 57.6 |
| Citigroup | C | 29.9 | 19.7 | 75.5 |
| Costco | COST | 25.7 | 25.5 | 45.6 |
| Cisco Systems | CSCO | 33.5 | 45.9 | 65.6 |
| CVS Health | CVS | 21.8 | 12 | 84.5 |
| Dow Inc. | DOW | 31.9 | 26.3 | 78.1 |
| Duke Energy | DUK | 20.3 | 26.3 | 46.7 |
| Ford | F | 45.7 | 17.7 | 70.8 |
| Gilead Sciences | GILD | 23.4 | 6.8 | 59.7 |
| General Motors | GM | 40.5 | 30.8 | 68.6 |
| Intel | INTC | 31.6 | 33.9 | 40.2 |
| Johnson & Johnson | JNJ | 19 | 38.7 | 22.2 |
| Coca-Cola | KO | 20.7 | 30.1 | 48.5 |
| Altria Group | MO | 46 | 39.6 | 80 |
| Merck | MRK | 20.2 | 36.7 | 47.9 |
| Marvell Tech. | MRVL | 31 | 51.1 | 48.2 |
| Morgan Stanley | MS | 30 | 14.3 | 88.5 |
| Micron | MU | 17.8 | 29.8 | 53.4 |
| Oracle | ORCL | 37.6 | 39.5 | 60.2 |
| Pfizer | PFE | 49 | 21.5 | 24.4 |
| PayPal | PYPL | 33.9 | 32.6 | 74.8 |
| Starbucks | SBUX | 48.8 | 41.5 | 67.4 |
| AT&T | T | 18.2 | 25.1 | 28.9 |
| Verizon | VZ | 13.5 | 34.7 | 35.6 |
| Walgreens Boots Alliance | WBA | 65.3 | 5.8 | 67.1 |
| Wells Fargo | WFC | 51.6 | 4.8 | 69.9 |
| Walmart | WMT | 51.6 | 56.1 | 54.9 |
| Exxon-Mobil | XOM | 35 | 31.7 | 62.2 |
Weekly Trade Discussion: Open Positions
Income Wheel Portfolio Open Positions
Selling Put: PFE August 19, 2022, 50 Puts
Original trade published on 7-11-2022 (click to see original alert)
Current Comments: At the time of the trade, PFE was trading for 53.35. We sold the August 19, 2022, 50 puts for a credit of $1.00. Our probability of success on the trade was 69.72% and the probability of touch was 58.04%.
PFE is now trading for 48.29, several dollars lower than when we first initiated the trade and is now slightly below our 50 put strike. Our breakeven on the trade is 49.
Our probability of success stands at 16.89% and our probability of touch is 34.24%. No worries here. PFE is part of our Income Wheel strategy, so if PFE does close below our short put strike at expiration we will simply begin the process of selling covered calls on our newly issued shares.
Put Side:
Covered Call: GDX August 19, 2022, 28 Calls
Original trade published on 7-18-2022 (click here to see original alert)
Current Comments: As part of our Income Wheel Strategy, we were assigned shares of GDX at the 29 strike during the July expiration cycle. At the time GDX was trading for 25.59, and it is currently trading for 26.62. Our break-even on the position currently stands at 27.71, so with GDX currently trading for 26.62 we are down slightly on the position. No worries. Like BITO, GDX offers wonderful opportunities to sell premium due to its high IV and we plan on continuing to take advantage of it.
Call Side:
Covered Call: BITO August 19, 2022, 16 Calls
Original trade published on 7-18-2022 (click here to see original alert)
Current Comments: As part of our Income Wheel Strategy, we were assigned shares of BITO at the 16 strike. BITO closed at 13.11 at the end of July expiration, but now stands at 14.98. Our break-even on the position currently stands at 14.62. I plan on buying back our 16 calls next week and sell more calls if BITO is trading below our 16 strike. If it manages to push above 16 prior to Friday, well, we are going to have a nice winner on our hands.
BITO continues to offer some excellent premium and we plan on continuing to take advantage of it. To think: BITO collapsed when we first initiated the position, and we are still profitable on the position. That speaks volumes about the power of selling premium in perpetuity.
And once we get four to six months under our belts, you will begin to understand the true power of the approach as we continue to sell premium over and over and over.
Call Side:
Selling Put: WFC September 23, 2022, 41 Puts
Original trade published on 8-10-2022 (click to see original alert)
Current Comments: At the time of the trade WFC was trading for 44.48. We sold the September 23, 2022, 41 puts for a credit of $0.61. Our probability of success on the trade was 75.44% and the probability of touch was 47.48%.
WFC is now trading higher at 45.25. Our break-even is 40.39. Our probability of success stands at 79.64% and our probability of touch is 39.41%.
Put Side:
Selling Put: KO September 23, 2022, 60 Puts
Original trade published on 8-10-2022 (click to see original alert)
Current Comments: At the time of the trade, KO was trading for 63.15. We sold the September 23, 2022, 60 puts for a credit of $0.62. Our probability of success on the trade was 74.78% and the probability of touch was 49.13%.
KO is now trading slightly higher at 63.22. Our break-even is 59.38. Our probability of success stands at 74.93%, while our probability of touch is reading 48.84%. Our puts are currently trading at $0.64.
Put Side:
Income Trades Portfolio: Open Positions
Selling Put: JPM September 16, 2022, 100 Puts
Original trade published on 7-26-2022 (click to see original alert)
Current Comments: At the time of the trade, JPM was trading for 113.76. We sold the September 16, 2022, 100 puts for a credit of $1.22. Our probability of success on the trade was 81.72% and the probability of touch was 34.94%.
JPM is now trading for 120.14, over $6 higher than when we first initiated the trade. Our break-even on the trade is 98.78.
Our probability of success stands at 93.85% and our probability of touch is 11.96%. With 36 days left in the trade, there seems little reason to hold on to the trade when we can lock in close to $1 worth of premium and potentially sell more premium in JPM for the same expiration cycle. Unless we see a drastic move to the downside early next week, I plan on buying back our puts and immediately selling more premium in JPM, or in another potential stock on our watch list.
Put Side:
The next Cabot Options Institute – Income Trader issue will be published on August 19, 2022.
About the Analyst
Andy Crowder
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.