Please ensure Javascript is enabled for purposes of website accessibility
Income Trader
Reliable Income From Time-Tested Strategies

Cabot Options Institute – Income Trader Issue: January 9, 2023

We sold some additional premium in Wells Fargo (WFC) late last week and I intend to sell even more as we begin 2023. Our PFE 49 puts are due to expire this week and if all goes well, I plan to buy back the puts for $0.05 and immediately sell more put premium going out to the February 17 expiration cycle.

The same goes for my GDX and KO positions. I intend to buy back our put positions in both underlying stocks and immediately sell more premium. And like PFE, I will be focusing on selling premium for the February 17 expiration cycle.

Current Positions

Open DateTickerStock Price (open)Stock Price (current)StrategyTradeOpen PriceCurrent PriceDelta
Income Wheel Portfolio - Open Trades
12/19/2022BITO$10.31 $10.67 Covered CallJanuary 20, 2023 11.5 Call$0.30 $0.07 0.17
12/8/2022PFE$51.60 $50.92 Selling PutsJanuary 13, 2023 49 Put$0.62 $0.21 0.18
1/5/2023WFC$42.35 $42.80 Covered CallFebruary 17, 2023 45 Call$0.84 $0.88 0.33
11/29/2022GDX$28.03 $31.56 Selling PutsJanuary 20, 2023 26 Put$0.87 $0.02 0.01
11/29/2022KO$62.23 $63.40 Selling PutsJanuary 20, 2023 60 Put$0.84 $0.08 0.07
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%
11/3/202212/8/2022PFEShort PutDecember 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%
11/17/202212/30/2022WFCShort PutDecember 30, 2022 44 Put$1.02 Assigned at $44($1.37)-3.11%
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 ETFARKK54.213.246.8
Proshares Bitcoin ETFBITO51.20.562.4
iShares MSCI Emerging MarketsEEM24.122.273.4
iShares MSCI EAFEEFA20.827.967.9
iShares MSCI Mexico ETFEWW23.015.172.8
iShares MSCI BrazilEWZ39.236.356.8
iShares China Large-CapFXI37.027.173
Vaneck Gold MinersGDX39.533.473.6
SPDR Gold GLD16.310.770.1
iShares High-YieldHYG12.521.367.8
SPDR Regional BankKRE26.215.760.3
iShares Silver TrustSLV32.8454.6
iShares 20+ Treasury BondTLT21.734.264.7
United States Oil FundUSO42.617.936.2
Proshares Ultra VIX ShortUVXY84.01.226.2
Barclays S&P 500 VIX ETNVXX59.32.426.5
SPDR BiotechXLB24.347.861.9
SPDR Energy Select XLE32.422.658.5
SPDR FinancialsXLF22.25.571.8
SPDR UtilitiesXLU20.02253.5
SPDR Retail XRT34.75.263.2

Stock Watchlist – Weekly Trade Ideas

Ticker Symbol IVIV Rank HPMR Oversold - Overbought
Bank of AmericaBAC34.925.577.4
Bristol-MyersBMY24.138.547.3
Citigroup C37.23075.1
CostcoCOST25.97.269.5
Cisco SystemsCSCO24.212.259.5
CVS HealthCVS26.129.131.2
Dow Inc.DOW32.414.981.5
Duke EnergyDUK22.724.365.3
FordF48.832.967.4
Gilead SciencesGILD29.635.573.1
General MotorsGM43.223.362.2
Intel INTC48.755.974.4
Johnson & JohnsonJNJ19.226.764.8
Coca-ColaKO18.612.552.3
Altria GroupMO22.913.461.7
Merck MRK23.730.881.8
Marvell Tech.MRVL563142.6
Morgan StanleyMS34.630.659.5
MicronMU44.615.876.6
OracleORCL25.512.479.6
PfizerPFE30.130.649.2
PaypalPYPL594069.8
StarbucksSBUX34.636.381.7
AT&TT29.341.377.9
VerizonVZ28.14788.4
Walgreens Boots AllianceWBA2814.937.5
Wells Fargo WFC35.724.866.9
WalmartWMT19.47.766.1
Exxon-MobilXOM31.415.361.4

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 BITO 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 breakeven stands at 12.99.

With BITO trading for 10.67, our January 20, 2023, 11.5 calls that we sold for $0.30 on December 19 are currently worth $0.07. I plan on holding until expiration or until we can buy back our 11.5 calls for $0.05 or less.

COI_IT_010923_BITO.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 breakeven currently stands at 46.38.

Several 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 50.92, the probability of success stands at 81.23%, and the price of our 49 puts is $0.22. As it stands, our PFE position is in good shape. I will allow our 49 puts to carry through expiration.

COI_IT_010923_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: Several weeks ago, we sold the January 20, 2023, 26 puts for $0.87.

Now, with GDX trading for 31.56, the probability of success stands at 98.18%, and the price of the 26 puts sits at $0.02. I intend on buying back our 26 puts early in the week and will immediately sell more premium, most likely going out to the February 17 expiration cycle.

COI_IT_010923_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 63.40, the probability of success stands at 92.52%, and the price of the 60 puts sits at $0.08. I plan to buy back our 60 puts and immediately sell more puts early in the week, most likely for the February 17 expiration cycle.

COI_IT_010923_KO.png

Covered Calls: WFC February 17, 2023, 45 Calls
Original trade published on 1-5-2023 (click here to see original alert)

Current Comments: Last week we sold the February 17, 2023, 45 calls for $0.84.

Now, with WFC trading for 42.80, the probability of success stands at 70.42%, and the price of the 45 calls sits at $0.89. We are early in the expiration cycle, so there isn’t much to do at the moment other than to allow the wheel strategy to work its magic.

COI_IT_010923_WFC.png


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

January 17, 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.