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Income Trader
Reliable Income From Time-Tested Strategies

Cabot Options Institute – Income Trader Issue: December 19, 2022

As we head into the holiday season, there really isn’t much to do with our existing positions. I do plan on buying back our BITO calls this week and selling more calls against our shares, but other than that I don’t have any plans, at least at the moment, to place any trades in our Income Wheel portfolio. That being said, after the sell-off last week there are several good candidates for our shorter-term Income Trades portfolio. If all goes as planned, we could have at least one, if not two trades for our one-off, short-term (30 to 60 days) Income Trades portfolio.

Current Positions

Open DateTickerStock Price (open)Stock Price (current)StrategyTradeOpen PriceCurrent PriceDelta
Income Wheel Portfolio - Open Trades
11/17/2022BITO$10.14 $10.50 Covered CallDecember 30, 2022 12 Call$0.45 $0.07 0.88
11/17/2022WFC$46.02 $41.19 Selling PutsDecember 30, 2022 44 Put$1.02 $2.85 0.93
12/8/2022PFE$51.60 $51.40 Selling PutsJanuary 13, 2023 49 Put$0.62 $0.52 0.23
11/29/2022GDX$28.03 $28.60 Selling PutsJanuary 20, 2023 26 Put$0.87 $0.48 0.21
11/29/2022KO$62.23 $62.75 Selling PutsJanuary 20, 2023 60 Put$0.84 $0.42 0.2
Income Trades Portfolio - Open Trades
Open DateClose DateTickerStrategyTradeOpen Price Closed PriceProfitReturn
Income Wheel Portfolio - Closed Trades
6/3/20227/8/2022PFEShort PutJuly 8, 2022 50 Put$0.65 $0.00 $0.65 1.30%
6/10/20227/15/2022GDXShort PutJuly 15, 2022 29 Put$0.66 Assigned at $29($2.75)-9.48%
6/10/20227/15/2022BITOShort PutJuly 15, 2022 16 Put$0.82 Assigned at $16($2.09)-13.10%
6/22/20227/21/2022WFCShort PutJuly 29, 2022 35 Put$0.80 $0.02 $0.78 2.23%
6/30/20228/10/2022KOShort PutAugust 19, 2022 57.5 Put$0.70 $0.03 $0.67 1.20%
7/21/20228/10/2022WFCShort PutAugust 19, 2022 39 Put$0.46 $0.04 $0.42 1.08%
7/18/20228/17/2022BITOCovered Call August 19, 2022 16 Call$0.50 $0.03 $0.47 3.59%
7/18/20228/17/2022GDXCovered Call August 19, 2022 28 Call$0.63 $0.05 $0.57 2.22%
7/11/20228/23/2022PFEShort PutAugust 19, 2022 50 Put$1.00 Assigned at $50$0.21 0.43%
8/17/20229/7/2022BITOCovered Call September 23, 2022 16.5 Call$0.55 $0.03 $0.52 4.00%
8/17/20229/7/2022GDXCovered Call September 23, 2022 28 Call$0.59 $0.07 $0.52 2.03%
8/23/20229/23/2022PFECovered Call October 21, 2022 50 Call $1.50 $0.09 $1.41 2.82%
8/10/20229/23/2022KOShort PutSeptember 23, 2022 60 Put$0.62 Assigned at $60($0.78)-1.30%
8/10/20229/23/2022WFCShort PutSeptember 23, 2022 41 Put$0.61 Assigned at $41$0.02 0.05%
9/7/202210/17/2022BITOShort PutOctober 21, 2022 14 Call$0.40 $0.03 $0.37 2.60%
9/7/202210/17/2022GDXCovered Call October 21, 2022 26 Call$0.70 $0.04 $0.66 2.50%
9/26/202210/21/2022WFCCovered Call October 21, 2022 41 Call$1.30 Called away at $41$1.89 4.67%
9/26/202210/21/2022KOCovered Call October 21, 2022 60 Call$0.70 $0.00 $0.70 1.20%
9/23/20221028/2022PFECovered Call October 28, 2022 47 Call$0.56 Called away at $47$3.49 7.43%
10/17/202211/17/2022BITOCovered Call November 25, 2022 13.5 Call$0.38 $0.03 $0.35 2.60%
10/25/202211/17/2022WFCShort PutNovember 25, 2022 43 Put$0.96 $0.07 $0.89 2.00%
10/17/202211/25/2022GDXCovered Call November 25, 2022 26 Call$0.58 Called away at $26$1.09 3.87%
10/25/202211/25/2022KOCovered Call November 25, 2022 60 Call$0.80 Called away at $60$2.20 3.75%
11/3/202212/8/2022PFESelling PutsDecember 16, 2022 45 Put$1.08 $0.02 $1.06 2.36%
30.05%
Income Trades Portfolio - Closed Trades
7/26/20228/17/2022JPMShort PutSeptember 16, 2022 100 Put$1.22 $0.16 $1.06 1.10%

Weekly High-Probability Mean Reversion Indicator

Here are the various levels I use to determine if an ETF is in an oversold or overbought state.

Very Overboughtgreater than or equal to 80.1
Overbought60.1 to 80.0
Neutral40.1 to 60
Oversold20.1 to 40.0
Very Oversoldless 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 Watchlist – Weekly Trade Ideas

Ticker Symbol IVIV Rank HPMR Oversold - Overbought
ARK Innovation ETFARKK56.628.331
Proshares Bitcoin ETFBITO75.016.242.7
iShares MSCI Emerging MarketsEEM21.49.634.1
iShares MSCI EAFEEFA19.819.134.2
iShares MSCI Mexico ETFEWW23.611.725.1
iShares MSCI BrazilEWZ41.339.915.1
iShares China Large-CapFXI37.329.549.3
Vaneck Gold MinersGDX38.436.545.5
SPDR Gold GLD14.61.554.5
iShares High-YieldHYG12.325.540.7
SPDR Regional BankKRE26.710.716.3
iShares Silver TrustSLV32.52957.1
iShares 20+ Treasury BondTLT21.535.854.7
United States Oil FundUSO42.822.741.5
Proshares Ultra VIX ShortUVXY93.06.649
Barclays S&P 500 VIX ETNVXX62.16.849.5
SPDR BiotechXLB24.738.633.5
SPDR Energy Select XLE34.032.735.3
SPDR FinancialsXLF24.615.225
SPDR UtilitiesXLU21.431.641.6
SPDR Retail XRT35.119.122.3

Stock Watchlist – Weekly Trade Ideas

Ticker Symbol IVIV Rank HPMR Oversold - Overbought
Bank of AmericaBAC35.730.216.2
Bristol-MyersBMY22.936.410.8
Citigroup C36.728.132.3
CostcoCOST27.917.517.7
Cisco SystemsCSCO26.017.339.3
CVS HealthCVS25.427.124.7
Dow Inc.DOW32.322.838.4
Duke EnergyDUK21.119.746.5
FordF43.518.318.4
Gilead SciencesGILD26.227.143.8
General MotorsGM40.016.920.5
Intel INTC38.727.223.3
Johnson & JohnsonJNJ18.617.740
Coca-ColaKO19.017.140
Altria GroupMO22.51449.8
Merck MRK22.324.349.7
Marvell Tech.MRVL57.542.131.5
Morgan StanleyMS32.423.435.7
MicronMU49.632.427.1
OracleORCL282043.2
PfizerPFE27.82047.7
PaypalPYPL47.518.517.9
StarbucksSBUX29.713.234.8
AT&TT25.11631.9
VerizonVZ26.336.938.8
Walgreens Boots AllianceWBA35.742.426.7
Wells Fargo WFC35.625.816.3
WalmartWMT20.514.423.9
Exxon-MobilXOM32.020.636.7

Weekly Trade Discussion: Open Positions

Income Wheel Portfolio: Open Positions

Covered Call: BITO December 30, 2022, 12 Calls
Original trade published on 11-17-2022 (click here to see original alert)

Current Comments: We’ve managed to sell and lock in a total of $2.63 worth of premium, or 13.6%, over four trades since introducing this position to the Income Wheel Portfolio. We were assigned the stock for $16 back on July 15, 2022, so most of our premium has come during the covered call phase of our strategy. Our current break-even stands at 12.99.

Lastly, with BITO trading for 10.66, our December 30, 2022, 12 calls that we sold for $0.45 on November 17 are currently worth $0.07. Since we have little to no premium left in our short calls, I will be buying back the 12 calls this week and immediately selling more premium.

COI_IT_121922_BITO.png

Selling Puts: WFC December 30, 2022, 44 Puts
Original trade published on 11-17-2022 (click here to see original alert)

Current Comments: We’ve locked in $5.09 worth of premium since introducing WFC to the portfolio back in late June. Our break-even point, or cost basis on the position, is 35.91.

Roughly one month ago, with WFC trading for 46.09, we sold puts again, this time at the 44 strike. Now, with WFC trading at 41.19, the probability of success stands at 12.82%, and the price of our 44 puts stands at $2.85. If WFC closes below our 44 put strike, no worries, per our Income Wheel guidelines we will simply be issued shares in WFC (100 shares per put contract sold) and immediately sell calls against our newly acquired shares.

COI_IT_121922_WFC.png

Selling Puts: PFE January 13, 2023, 49 Puts
Original trade published on 12-8-2022 (click here to see original alert)

Current Comments: We’ve managed to lock in $4.68, or 8.60% worth of premium, since introducing PFE to the portfolio. Our break-even currently stands at 46.38.

Two weeks ago, with PFE trading for 51.60 we sold the 49 puts for $0.62. At the time, the probability of the 49 puts closing out of the money was 72.94%.

Now, with PFE trading at 51.40, the probability of success stands at 74.59%, and the price of our 49 puts stands at $0.52. As it stands, we are in good shape.

COI_IT_121922_PFE.png

Selling Puts: GDX January 20, 2023, 26 Puts
Original trade published on 11-29-2022 (click here to see original alert)

Current Comments: A few weeks ago we sold the January 20, 2023 26 puts for $0.87.

Now, with GDX trading for 28.12, the probability of success stands at 74.02%, and the price of the 26 puts sits at $0.48. We are early in the expiration cycle, so there isn’t much to do at the moment, other than to allow time decay to work its magic.

COI_IT_121922_GDX.png

Selling Puts: KO January 20, 2023, 60 Puts
Original trade published on 11-29-2022 (click here to see original alert)

Current Comments: A few weeks ago we sold the January 20, 2023 60 puts for $0.84.

Now, with KO trading for 62.75, the probability of success stands at 78.38%, and the price of the 60 puts sits at $0.42. Like our GDX puts, we are early in the expiration cycle, so there isn’t much to do at the moment.

COI_IT_121922_KO.png


The next Cabot Options Institute – Income Trader issue will be published on

December 27, 2022.

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.