Not much to speak of this week. We didn’t make any moves, just allowed time decay to work its magic on our August positions. As a result, we should be able to buy back several of our short calls/puts and immediately sell more premium for the September expiration cycle. So, expect to see several trade alerts next week on our existing positions and a few new positions as I intend to make a few short-term trades as we move towards the September expiration cycle.
Cabot Options Institute – Income Trader Issue: August 5, 2022
Not much to speak of this week. We didn’t make any moves, just allowed time decay to work its magic on our August positions. As a result, we should be able to buy back several of our short calls/puts and immediately sell more premium for the September expiration cycle. So, expect to see several trade alerts next week on our existing positions and a few new positions as I intend to make a few short-term trades as we move towards the September expiration cycle.
Current Positions
| Open Date | Ticker | Stock Price (open) | Stock Price (current) | Strategy | Trade | Open Price | Current Price | Delta |
| Income Wheel Portfolio - Open Trades | ||||||||
| 6/30/2022 | KO | $62.75 | $64.06 | Short Put | 8/19/22 57.5 Put | $0.70 | $0.11 | 0.05 |
| 7/11/2022 | PFE | $53.35 | $50.72 | Short Put | 8/19/22 50 Put | $1.00 | $0.94 | 0.38 |
| 7/21/2022 | WFC | $42.91 | $43.32 | Short Put | 8/19/22 39 Put | $0.46 | $0.26 | 0.12 |
| 7/18/2022 | BITO | $13.11 | $14.79 | Covered Call | 8/19/22 16 Call | $0.50 | $0.58 | 0.64 |
| 7/18/2022 | GDX | $25.59 | $26.00 | Covered Call | 8/19/22, 28 Call | $0.63 | $0.38 | 0.75 |
| Income Trades - Open | ||||||||
| 7/26/2022 | JPM | $113.76 | $114.81 | Short Put | 9/16/22 100 Put | $1.22 | $0.87 | 0.12 |
| Income Wheel Portfolio - Closed Trades | ||||||||
| 6/3/2022 | 7/8/2022 | PFE | Short Put | 7/8/22 50 Put | $0.65 | $0.00 | $0.65 | 1.30% |
| 6/10/2022 | 7/15/2022 | GDX | Short Put | 7/15/22 29 Put | $0.66 | Assigned at $29 | ($2.75) | -9.48% |
| 6/10/2022 | 7/15/2022 | BITO | Short Put | 7/15/22 16 Put | $0.82 | Assigned at $16 | ($2.09) | -13.10% |
| 6/22/2022 | 7/21/2022 | WFC | Short Put | 7/29/22 35 Put | $0.80 | $0.02 | $0.78 | 2.23% |
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 | 61.2 | 47.3 | 69.6 |
| Proshares Bitcoin ETF | BITO | 78.4 | 23.8 | 48.7 |
| iShares MSCI Emerging Markets | EEM | 21.4 | 33.1 | 60.5 |
| iShares MSCI EAFE | EFA | 19.7 | 29.9 | 65.1 |
| iShares MSCI Mexico ETF | EWW | 22.6 | 35.3 | 51.1 |
| iShares MSCI Brazil | EWZ | 35.8 | 41.9 | 77.4 |
| iShares China Large-Cap | FXI | 31.8 | 19.8 | 41.8 |
| Vaneck Gold Miners | GDX | 42.4 | 68.2 | 61.9 |
| SPDR Gold | GLD | 16.9 | 13.3 | 76.9 |
| iShares High-Yield | HYG | 13.9 | 36.5 | 71.3 |
| SPDR Regional Bank | KRE | 26.9 | 14.4 | 61.5 |
| iShares Silver Trust | SLV | 29.7 | 20 | 67.9 |
| iShares 20+ Treasury Bond | TLT | 19.8 | 38.3 | 57.3 |
| United States Oil Fund | USO | 50.4 | 40.1 | 31.2 |
| Proshares Ultra VIX Short | UVXY | 119.5 | 19.9 | 32.6 |
| Barclays S&P 500 VIX ETN | VXX | 68.3 | 11.9 | 49.6 |
| SPDR Biotech | XLB | 23.9 | 35.5 | 63.6 |
| SPDR Energy Select | XLE | 39.7 | 48 | 43.8 |
| SPDR Financials | XLF | 23.8 | 24.1 | 60.2 |
| SPDR Utilities | XLU | 18.8 | 30.1 | 84.7 |
| SPDR Retail | XRT | 37.2 | 39.6 | 68.4 |
Stock Watchlist
| Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought | |
| Bank of America | BAC | 32.6 | 29.8 | 51.8 |
| Bristol-Myers | BMY | 24.6 | 38.6 | 29.9 |
| Citigroup | C | 32.4 | 28.6 | 51.7 |
| Costco | COST | 27.3 | 26.3 | 65.1 |
| Cisco Systems | CSCO | 35.4 | 53.4 | 60.4 |
| CVS Health | CVS | 24.3 | 21.5 | 81.3 |
| Dow Inc. | DOW | 35.6 | 53.5 | 46.3 |
| Duke Energy | DUK | 21.5 | 46.9 | 64.1 |
| Ford | F | 50.3 | 37.8 | 76.1 |
| Gilead Sciences | GILD | 24.2 | 7.1 | 64.9 |
| General Motors | GM | 43.4 | 37.5 | 59.1 |
| Intel | INTC | 34.4 | 39.4 | 31.3 |
| Johnson & Johnson | JNJ | 19.8 | 30.9 | 39.8 |
| Coca-Cola | KO | 22.1 | 33.7 | 51.8 |
| Altria Group | MO | 29.5 | 58.7 | 67.7 |
| Merck | MRK | 23.3 | 29 | 19.7 |
| Marvell Tech. | MRVL | 57.3 | 46 | 70.6 |
| Morgan Stanley | MS | 29.9 | 20.2 | 73.9 |
| Micron | MU | 41.7 | 31 | 73.3 |
| Oracle | ORCL | 25.8 | 30 | 68.6 |
| Pfizer | PFE | 27.3 | 17.8 | 36.1 |
| Paypal | PYPL | 49.4 | 37.6 | 80.1 |
| Starbucks | SBUX | 31.2 | 49 | 71.3 |
| AT&T | T | 25.4 | 33.9 | 27.4 |
| Verizon | VZ | 25.1 | 48.8 | 25.3 |
| Walgreens Boots Alliance | WBA | 27.6 | 18.2 | 46.8 |
| Wells Fargo | WFC | 33 | 13.5 | 48.3 |
| Walmart | WMT | 31.1 | 65.3 | 39.4 |
| Exxon-Mobil | XOM | 39.3 | 51.6 | 42.7 |
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 49.86, 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 45.15% and our probability of touch is 92.61%. 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 26.43. Our breakeven on the position currently stands at 27.71, so with GDX currently trading for 26.43 we are down slightly on the position. No worries. Like BITO, GDX offers wonderful opportunities to sell premium 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 13.83. Our breakeven on the position currently stands at 14.62, so like GDX, we are slightly down on the position.
However, with only $0.17 left in premium, I might buy back our 16 calls and sell more calls in September which will lower our cost basis even further and certainly put us back in profitable territory.
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 August 19, 2022, 39 Puts
Original trade published on 7-21-2022 (click to see original alert)
Current Comments: At the time of the trade WFC was trading for 42.91. We sold the August 19, 2022, 39 puts for a credit of $0.46. Our probability of success on the trade was 79.10% and the probability of touch was 40.44%.
WFC is now trading higher at 42.77, $3.77, or 9.7%, above our 39 put strike. Our breakeven is 38.54. Our probability of success stands at 87.50% and our probability of touch is 24.50%.
I will most likely buy back our puts next week and sell more for the September expiration cycle.
Put Side:
Selling Put: KO August 19, 2022, 57.5 Puts
Original trade published on 6-30-2022 (click to see original alert)
Current Comments: At the time of the trade KO was trading for 62.75. We sold the August 19, 2022, 57.5 puts for a credit of $0.70. Our probability of success on the trade was 77.88% and the probability of touch was 42.59%.
KO is now trading slightly higher at 63.67, well above our 57.5 put strike. Our breakeven is 56.80. Our probability of success stands at 94.34%, while our probability of touch is reading 11.15%. Our puts are currently trading at $0.09.
I will be buying back our puts next week, lock in some premium and immediately sell more puts in KO.
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 112.36, slightly lower than when we first initiated the trade. Our breakeven on the trade is 98.78.
Our probability of success stands at 83.16% and our probability of touch is 32.50%. So far, so good on this one. Time decay will begin to truly accelerate over the coming week, and if JPM manages to stay around these levels we should be able to take off the trade early for some nice profits.
Put Side
The next Cabot Options Institute – Income Trader issue will be published on August 12, 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.