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Income Trader
Reliable Income From Time-Tested Strategies

Cabot Options Institute – Income Trader Issue: January 3, 2023

I’m going to keep it short today as we enter the last of our holiday-shortened weeks.

The focus, as always, continues to be adding a few positions to the mix. I’ll be adding a new position in WFC this week with the hope of adding at least one, if not two, more underlying stocks to the portfolio as we start out 2023.

But, as we enter the first week of the year, let us not forget how wonderful 2022 was for our Income Trader service. We ended the year with 24 out of 27 winning trades for a 40% cumulative return. As with my other options-based services, given the market environment this past 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 $10.43 Covered CallJanuary 20, 2023 11.5 Call$0.30 $0.12 0.2
11/17/2022WFC$46.02 $41.29 Selling PutsDecember 30, 2022 44 Put$1.02 $3.05 0.94
12/8/2022PFE$51.60 $51.24 Selling PutsJanuary 13, 2023 49 Put$0.62 $0.28 0.19
11/29/2022GDX$28.03 $28.66 Selling PutsJanuary 20, 2023 26 Put$0.87 $0.22 0.14
11/29/2022KO$62.23 $63.61 Selling PutsJanuary 20, 2023 60 Put$0.84 $0.17 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 ETFARKK57.12740.6
Proshares Bitcoin ETFBITO59.42.645.8
iShares MSCI Emerging MarketsEEM22.518.444.9
iShares MSCI EAFEEFA20.434.945.2
iShares MSCI Mexico ETFEWW24.921.131.2
iShares MSCI BrazilEWZ39.336.946.5
iShares China Large-CapFXI38.631.350.9
Vaneck Gold MinersGDX39.236.747
SPDR Gold GLD15.98.863.6
iShares High-YieldHYG12.828.142.7
SPDR Regional BankKRE26.516.851.5
iShares Silver TrustSLV33.031.958.6
iShares 20+ Treasury BondTLT22.845.127
United States Oil FundUSO40.515.367.6
Proshares Ultra VIX ShortUVXY96.98.537.2
Barclays S&P 500 VIX ETNVXX68.69.938.1
SPDR BiotechXLB24.943.138.2
SPDR Energy Select XLE33.729.256.6
SPDR FinancialsXLF23.810.451.5
SPDR UtilitiesXLU21.325.746.1
SPDR Retail XRT35.016.145.4

Stock Watchlist – Weekly Trade Ideas

Ticker Symbol IVIV Rank HPMR Oversold - Overbought
Bank of AmericaBAC34.924.757.7
Bristol-MyersBMY25.252.420.6
Citigroup C37.330.156.2
CostcoCOST27.816.232.3
Cisco SystemsCSCO25.916.147.8
CVS HealthCVS25.024.827
Dow Inc.DOW35.035.548.9
Duke EnergyDUK21.618.557.8
FordF47.728.842.7
Gilead SciencesGILD27.625.951.3
General MotorsGM44.229.534.1
Intel INTC48.755.243.8
Johnson & JohnsonJNJ21.148.846.2
Coca-ColaKO18.915.651.2
Altria GroupMO23.117.538.6
Merck MRK22.426.254.9
Marvell Tech.MRVL55.636.740.2
Morgan StanleyMS35.83536.9
MicronMU4620.137.9
OracleORCL26.716.959.8
PfizerPFE27.120.946.9
PaypalPYPL52.428.156
StarbucksSBUX32.226.348.3
AT&TT30.243.548
VerizonVZ29.350.971.1
Walgreens Boots AllianceWBA37.346.219.3
Wells Fargo WFC35.724.439.4
WalmartWMT21.719.332.7
Exxon-MobilXOM31.818.862.9

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 more than 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 10.43, our January 20, 2023, 11.5 calls that we sold for $0.30 on December 19 are currently worth $0.12. I plan on holding until expiration or until we can buy back our 11.5 calls for $0.05 or less.

COI_IT_010323_BITO_call.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 51.24, the probability of success stands at 80.55%, and the price of our 49 puts is $0.28. As it stands, our PFE position is in good shape.

COI_IT_010323_PFE_put.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 28.66, the probability of success stands at 88.40%, and the price of the 26 puts sits at $0.14. So far, so good!

COI_IT_010322_GDX_put.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 63.61, the probability of success stands at 90.99%, and the price of the 60 puts sits at $0.11. 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_010323_KO_put.png


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

January 9, 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.