I’m going to keep the weekly commentary section rather short today. My hope is that everyone has had the opportunity to watch our latest subscriber-exclusive webinar from Wednesday as I covered a lot of ground, including closed trades, open trades and potential upcoming trades. We also discussed the ins and outs of bear call spreads and covered the importance of risk management.
Cabot Options Institute – Income Trader Issue: July 15, 2022
I’m going to keep the weekly commentary section rather short today. My hope is that everyone has had the opportunity to watch our latest subscriber-exclusive webinar from Wednesday as I covered a lot of ground, including closed trades, open trades and potential upcoming trades. We also discussed the ins and outs of bear call spreads and covered the importance of risk management. If you haven’t had a chance to listen to the call you can do so here: Cabot Options Institute Income Trader Live Analyst Briefing with Q&A – July 14, 2022
As a reminder, our GDX and BITO positions will most likely be assigned shares going into next week, so we will begin the wheel process of selling calls against our newly issued shares.
Moreover, as I covered in the webinar, I will be opening several new positions next week that are going to be shorter-term in nature. Basically, they will be trades that I do not intend to wheel. We went over a few of the trades and various potential set-ups in the webinar. Again, if you get a chance, give the webinar a view, it will be worth your time.
Current Positions
| Open Date | Ticker | Stock Price (open) | Stock Price (current) | Strategy | Trade | Open Price | Current Price | Delta |
| Income Wheel Portfolio | ||||||||
| 6/10/2022 | GDX | $30.76 | $25.71 | Sell Put | 7/15/22 29 Put | $0.66 | $3.30 | 0.98 |
| 6/10/2022 | BITO | $18.19 | $12.75 | Sell Put | 7/15/22 16 Put | $0.82 | $3.25 | 1 |
| 6/22/2022 | WFC | $38.57 | $38.74 | Sell Put | 7/29/22 35 Put | $0.80 | $0.39 | 0.17 |
| 6/30/2022 | KO | $62.75 | $62.18 | Sell Put | 8/19/22 57.5 Put | $0.70 | $0.57 | 0.18 |
| 7/11/2022 | PFE | $53.35 | $51.39 | Sell Put | 8/19/22 50 Put | $1.00 | $1.51 | 0.38 |
| Open Date | Close Date | Ticker | Strategy | Trade | Profit | Return |
| Income Trades Portfolio | ||||||
| 6/3/2022 | 7/8/2022 | PFE | Sell Put | July 8, 2022 50 Put | $0.65 | 1.30% |
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 | 70.6 | 61.9 | 65.9 |
| ProShares Bitcoin ETF | BITO | 89 | 44.5 | 56.3 |
| iShares MSCI Emerging Markets | EEM | 25.6 | 39.6 | 49.8 |
| iShares MSCI EAFE | EFA | 26.5 | 47.9 | 44.4 |
| iShares MSCI Mexico ETF | EWW | 25.6 | 59 | 31.4 |
| iShares MSCI Brazil | EWZ | 38.5 | 54.8 | 42.4 |
| iShares China Large-Cap | FXI | 34.4 | 27.5 | 61.4 |
| VanEck Gold Miners | GDX | 44.2 | 68.1 | 32.5 |
| SPDR Gold | GLD | 20.4 | 34.2 | 13.5 |
| iShares High-Yield | HYG | 17.1 | 67.1 | 57.9 |
| SPDR Regional Bank | KRE | 32.4 | 35.2 | 54.2 |
| iShares Silver Trust | SLV | 33.9 | 34.9 | 16 |
| iShares 20+ Treasury Bond | TLT | 23.9 | 65.3 | 48.3 |
| United States Oil Fund | USO | 55.2 | 43.7 | 37.3 |
| ProShares Ultra VIX Short | UVXY | 90.3 | 1.1 | 33.5 |
| Barclays S&P 500 VIX ETN | VXX | 65.4 | 0.9 | 36.6 |
| SPDR Biotech | XLB | 28 | 55.8 | 38.6 |
| SPDR Energy Select | XLE | 48.3 | 79.9 | 40 |
| SPDR Financials | XLF | 28.4 | 41.4 | 55.2 |
| SPDR Utilities | XLU | 22.1 | 61 | 54.1 |
| SPDR Retail | XRT | 41.6 | 57.2 | 53.4 |
Stock Watchlist
| Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought | |
| Bank of America | BAC | 42.6 | 56.7 | 24 |
| Bristol-Myers | BMY | 27.9 | 43.2 | 28.2 |
| Citigroup | C | 44.5 | 63.3 | 23.4 |
| Costco | COST | 31.8 | 37.6 | 74.4 |
| Cisco Systems | CSCO | 32.7 | 64.8 | 35.9 |
| CVS Health | CVS | 33.2 | 68.9 | 42.8 |
| Dow Inc. | DOW | 41.8 | 88.1 | 20.6 |
| Duke Energy | DUK | 24.9 | 95.8 | 52.4 |
| Ford | F | 59 | 47.3 | 44.5 |
| Gilead Sciences | GILD | 32 | 35.5 | 41.2 |
| General Motors | GM | 57.5 | 76.6 | 42.1 |
| Intel | INTC | 50.7 | 90 | 51.8 |
| Johnson & Johnson | JNJ | 24.4 | 48.3 | 39.3 |
| Coca-Cola | KO | 26.9 | 68.6 | 41.3 |
| Altria Group | MO | 37.3 | 94.9 | 36.3 |
| Merck | MRK | 27.7 | 42.5 | 63.4 |
| Marvell Tech. | MRVL | 57.6 | 49.5 | 57.6 |
| Morgan Stanley | MS | 44.1 | 49.9 | 35.3 |
| Micron | MU | 48.2 | 44.9 | 57.4 |
| Oracle | ORCL | 30.8 | 19.4 | 39.2 |
| Pfizer | PFE | 35.1 | 51.9 | 43.7 |
| PayPal | PYPL | 79.1 | 88 | 35.7 |
| Starbucks | SBUX | 42.4 | 77.8 | 55.5 |
| AT&T | T | 32 | 69.3 | 33.9 |
| Verizon | VZ | 25.8 | 54.8 | 43.8 |
| Walgreens Boots Alliance | WBA | 33.7 | 51.7 | 28.7 |
| Wells Fargo | WFC | 46.5 | 58.2 | 34.9 |
| Walmart | WMT | 27.9 | 78.6 | 77.5 |
| Exxon-Mobil | XOM | 46.5 | 86.2 | 34.4 |
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 51.07, several dollars lower than when we first initiated the trade, but still above our 50 put strike. Our breakeven on the trade is 49.
Our probability of success stands at 55.73% and our probability of touch is 84.45%.
Put Side
Selling Put: GDX July 15, 2022, 29 Puts
Original trade published on 6-10-2022 (click here to see original alert)
Current Comments: At the time of the trade GDX was trading for 30.76. We sold the July 15, 2022, 29 puts for a credit of $0.66. Our probability of success on the trade was 67.54% and the probability of touch was 62.30%.
GDX is now trading lower at 25.19, $3.81 below our 29 put strike. Our breakeven is 28.34.
As I’ve stated over the past few weeks, I’m not really concerned, as I plan to wheel GDX. If I’m assigned shares at the 29 strike, which looks very likely, I’ll gladly sell calls until my shares are eventually called away and then I’ll repeat the wheel process all over again. By continuing to sell premium we will lower our cost basis on an ongoing basis.
Put Side
Selling Put: BITO July 15, 2022, 16 Puts
Original trade published on 6-10-2022 (click here to see original alert)
Current Comments: At the time of the trade BITO was trading for 18.19. We sold the July 15, 2022, 16 puts for a credit of $0.82. Our probability of success on the trade was 64.65% and the probability of touch was 65.50%.
If I’m assigned shares at the 16 strike, which looks very likely, I’ll gladly sell calls until my shares of BITO are eventually called away and then I’ll repeat the wheel process all over again. So, be on the lookout for a trade alert early next week in BITO and GDX as we begin the process of selling calls.
Put Side
Selling Put: WFC July 29, 2022, 35 Puts
Original trade published on 6-22-2022 (click to see original alert)
Current Comments: At the time of the trade WFC was trading for 38.57. We sold the July 29, 2022, 35 puts for a credit of $0.80. Our probability of success on the trade was 72.13% and the probability of touch was 53.18%.
WFC is now trading higher at 40.83, $5.83 above our 35 put strike. Our breakeven is 32.10. Our probability of success stands at 92.98% and our probability of touch is 13.72%.
WFC announced earnings this morning and once the opening bell rang, we saw the stock pop more than 5%, which is wonderful for our position. With two weeks left until expiration and little to no premium left in our July 29, 2022 35 puts, there is a good chance I will buy our 35 puts back and immediately sell more premium in WFC.
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 lower at 62.60, but still well above our 57.5 put strike. Our breakeven is 56.80. Our probability of success stands at 82.07%, while our probability of touch is reading 34.79%. Our puts are currently trading at $0.47.
Put Side
Income Trades Portfolio Open Positions
No open positions.
The next Cabot Options Institute – Income Trader issue will be published on July 22, 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.