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Income Trader
Reliable Income From Time-Tested Strategies

Cabot Options Institute – Income Trader Issue: December 27, 2022

I’m going to keep it short today as we enter the first of two holiday-shortened weeks. The focus, as always, continues to be adding a few positions to the mix. As it stands, we have five open positions with one position, WFC, due to expire this week. The rest are due to expire in January. My intent with WFC is to wheel our position, which simply means, if the stock closes below our put strike of 44 we will be issued shares and begin the process, once again, of selling calls against our newly acquired shares.

But as we enter the final week of the year, let us not forget how wonderful this year was for our Income Trader service. We look to end the year with 23 out of 26 winning trades for a 35% cumulative return. As with my other options-based services, given the market environment this year, I couldn’t be more pleased with the results in my first year here at Cabot. And here’s hoping 2023 offers us even more income opportunities.

Current Positions

Open DateTickerStock Price (open)Stock Price (current)StrategyTradeOpen PriceCurrent PriceDelta
Income Wheel Portfolio - Open Trades
12/19/2022BITO$10.31 $10.50 Covered CallJanuary 20, 2023 11.5 Call$0.30 $0.22 0.27
11/17/2022WFC$46.02 $40.98 Selling PutsDecember 30, 2022 44 Put$1.02 $3.05 0.94
12/8/2022PFE$51.60 $51.83 Selling PutsJanuary 13, 2023 49 Put$0.62 $0.31 0.17
11/29/2022GDX$28.03 $28.87 Selling PutsJanuary 20, 2023 26 Put$0.87 $0.25 0.15
11/29/2022KO$62.23 $63.82 Selling PutsJanuary 20, 2023 60 Put$0.84 $0.19 0.11
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%
9/7/202210/17/2022BITOCovered Call October 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%
11/17/202212/19/2022BITOCovered Call December 30, 2022 12 Call$0.45 $0.04 $0.41 3.42%
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 ETFARKK54.422.722.9
Proshares Bitcoin ETFBITO67.61645.9
iShares MSCI Emerging MarketsEEM22.322.337.4
iShares MSCI EAFEEFA19.120.746.3
iShares MSCI Mexico ETFEWW22.15.161.1
iShares MSCI BrazilEWZ36.428.658.9
iShares China Large-CapFXI34.919.947.8
Vaneck Gold MinersGDX38.331.751.5
SPDR Gold GLD14.82.452.5
iShares High-YieldHYG11.52344.1
SPDR Regional BankKRE25.21142
iShares Silver TrustSLV32.431.158.5
iShares 20+ Treasury BondTLT23.044.628.4
United States Oil FundUSO41.21966.5
Proshares Ultra VIX ShortUVXY95.11042.2
Barclays S&P 500 VIX ETNVXX66.210.542.8
SPDR BiotechXLB24.135.540.4
SPDR Energy Select XLE32.322.456.5
SPDR FinancialsXLF23.110.543
SPDR UtilitiesXLU20.836.252.7
SPDR Retail XRT33.815.637.8

Stock Watchlist – Weekly Trade Ideas

Ticker Symbol IVIV Rank HPMR Oversold - Overbought
Bank of AmericaBAC34.224.840.5
Bristol-MyersBMY22.929.323.8
Citigroup C25.725.540.8
CostcoCOST25.810.632.9
Cisco SystemsCSCO24.512.639.9
CVS HealthCVS25.326.420.9
Dow Inc.DOW31.318.856.2
Duke EnergyDUK19.512.967.5
FordF44.921.922.5
Gilead SciencesGILD23.913.431.8
General MotorsGM41.720.422.8
Intel INTC41.936.425.8
Johnson & JohnsonJNJ18.420.153.7
Coca-ColaKO17.510.359.5
Altria GroupMO21.610.848.7
Merck MRK20.89.269.1
Marvell Tech.MRVL55.23630.3
Morgan StanleyMS33.627.838.6
MicronMU42.510.530.2
OracleORCL2613.951.9
PfizerPFE26.213.953.3
PaypalPYPL47.317.627
StarbucksSBUX29.312.838.3
AT&TT2728.441.1
VerizonVZ26.334.665.6
Walgreens Boots AllianceWBA35.841.231.1
Wells Fargo WFC35.225.130.8
WalmartWMT2010.437.5
Exxon-MobilXOM29.14.759.7

Weekly Trade Discussion: Open Positions

Income Wheel Portfolio: Open Positions

Covered Call: BITO January 20, 2023, 11.5 Calls
Original trade published on 12-19-2022 (click here to see original alert)

Current Comments: We’ve managed to sell and lock in a total of $3.04 worth of premium, or over 15%, over five 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 10.50, our newly acquired January 20, 2023, 11.5 calls that we sold for $0.30 on December 19 are currently worth $0.22.

COI_IT_122722_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 40.98, the probability of success stands at 10.41%, and the price of our 44 puts stands at roughly $3. 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_122722_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 51.83, the probability of success stands at 81.44%, and the price of our 49 puts stands at $0.31. As it stands, our PFE position is in good shape.

COI_IT_122722_PFE.png

Selling Puts: GDX January 20, 2022, 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 28.87, the probability of success stands at 83.35%, and the price of the 26 puts sits at $0.25. So far, so good!

COI_IT_122722_GDX.png

Selling Puts: KO January 20, 2022, 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 63.82, the probability of success stands at 87.81%, and the price of the 60 puts sits at $0.19. Like our GDX puts, 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_122722_KO.png


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

January 3, 2023.

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.