All of the major indices continued to rally this week, which helped all of our open positions.
We sold calls against our newly assigned shares of BITO and GDX early in the week and decided to sell more puts in WFC towards the latter part of the week. We currently have five open positions.
That being said, I plan to add at least two to three more as we move through earnings season. I really like to sell puts for an expiration cycle or two in large-cap equities with highly liquid options several days to a week after earnings are announced. I’m currently looking at a few of the big banks to sell puts on next week as well as a few credit card companies including AXP, V and MA.
Cabot Options Institute – Income Trader Issue: July 22, 2022
All of the major indices continued to rally this week, which helped all of our open positions.
We sold calls against our newly assigned shares of BITO and GDX early in the week and decided to sell more puts in WFC towards the latter part of the week. We currently have five open positions.
That being said, I plan to add at least two to three more as we move through earnings season. I really like to sell puts for an expiration cycle or two in large-cap equities with highly liquid options several days to a week after earnings are announced. I’m currently looking at a few of the big banks to sell puts on next week as well as a few credit card companies including AXP, V and MA.
If all goes well, we might just see an additional two to three open positions next week. Earnings season typically acts as a launching pad of sorts for more short-term income trades and I’m hoping the historic precedents hold up again this time around.
Current Positions
| Open Date | Ticker | Stock Price (open) | Stock Price (current) | Strategy | Trade | Open Price | Current Price | Delta |
| Income Wheel Portfolio - Open Trades | ||||||||
| 6/30/2022 | KO | $62.75 | $61.36 | Sell Put | 8/19/22 57.5 Put | $0.70 | $0.48 | 0.19 |
| 7/11/2022 | PFE | $53.35 | $51.39 | Sell Put | 8/19/22 50 Put | $1.00 | $1.32 | 0.4 |
| 7/21/2022 | WFC | $42.91 | $43.28 | Sell Put | 8/19/22 39 Put | $0.46 | $0.41 | 0.16 |
| 7/18/2022 | BITO | $13.11 | $14.39 | Covered Call | 8/19/22 16 Calls | $0.50 | $0.68 | 0.65 |
| 7/18/2022 | GDX | $25.59 | $25.74 | Covered Call | 8/19/22, 28 Calls | $0.63 | $0.43 | 0.75 |
| Open Date | Close Date | Ticker | Strategy | Trade | Open Price | Closed Price | Profit | Return |
| Income Wheel Portfolio - Closed Trades | ||||||||
| 6/3/2022 | 7/8/2022 | PFE | Sell Put | 7/8/22 50 Put | $0.65 | $0.00 | $0.65 | 1.30% |
| 6/10/2022 | 7/15/2022 | GDX | Sell Put | 7/15/22 29 Put | $0.66 | Assigned at $29 | ($2.75) | -9.48% |
| 6/10/2022 | 7/15/2022 | BITO | Sell Put | 7/15/22 16 Put | $0.82 | Assigned at $16 | ($2.09) | -13.10% |
| 6/22/2022 | 7/21/2022 | WFC | Sell Put | 7/29/22 35 Put | $0.80 | $0.02 | $0.78 | 2.23% |
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 | 64.5 | 54.8 | 72.7 |
| Proshares Bitcoin ETF | BITO | 94.9 | 37.3 | 66 |
| iShares MSCI Emerging Markets | EEM | 23.6 | 37.6 | 59.6 |
| iShares MSCI EAFE | EFA | 23.7 | 38.3 | 65.1 |
| iShares MSCI Mexico ETF | EWW | 28.5 | 27.8 | 43.7 |
| iShares MSCI Brazil | EWZ | 37 | 48.7 | 38.5 |
| iShares China Large-Cap | FXI | 33.1 | 22.3 | 46.4 |
| Vaneck Gold Miners | GDX | 45.1 | 66.6 | 38 |
| SPDR Gold | GLD | 18.6 | 24.4 | 41.3 |
| iShares High-Yield | HYG | 15.7 | 47.6 | 74.9 |
| SPDR Regional Bank | KRE | 29.4 | 20 | 73 |
| iShares Silver Trust | SLV | 30.7 | 25.2 | 40.2 |
| iShares 20+ Treasury Bond | TLT | 23.6 | 50.5 | 62 |
| United States Oil Fund | USO | 50.9 | 39.4 | 43.6 |
| Proshares Ultra VIX Short | UVXY | 110.2 | 12.4 | 26.2 |
| Barclays S&P 500 VIX ETN | VXX | 64.8 | 4.8 | 27.2 |
| SPDR Biotech | XLB | 26.5 | 49.5 | 67.5 |
| SPDR Energy Select | XLE | 42.7 | 60.4 | 52.9 |
| SPDR Financials | XLF | 26.6 | 28.2 | 68.5 |
| SPDR Utilities | XLU | 20.7 | 42.2 | 38.4 |
| SPDR Retail | XRT | 41.3 | 64.1 | 72.8 |
Stock Watchlist
| Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought | |
| Bank of America | BAC | 39.7 | 29.2 | 71.1 |
| Bristol-Myers | BMY | 24.8 | 45.3 | 33.3 |
| Citigroup | C | 39 | 31.9 | 77.2 |
| Costco | COST | 29 | 30.4 | 77.4 |
| Cisco Systems | CSCO | 31.8 | 53.6 | 69.3 |
| CVS Health | CVS | 33.4 | 58.4 | 43.8 |
| Dow Inc. | DOW | 36 | 45.3 | 48.9 |
| Duke Energy | DUK | 24.4 | 79.4 | 34.5 |
| Ford | F | 52.8 | 52.6 | 79.2 |
| Gilead Sciences | GILD | 30.6 | 32.1 | 39.3 |
| General Motors | GM | 52.7 | 53.2 | 71.4 |
| Intel | INTC | 46.6 | 79.1 | 79.7 |
| Johnson & Johnson | JNJ | 20.5 | 36.6 | 31.1 |
| Coca-Cola | KO | 25.6 | 54.2 | 36.9 |
| Altria Group | MO | 35.7 | 76.8 | 54.6 |
| Merck | MRK | 25.8 | 46.1 | 34.6 |
| Marvell Tech. | MRVL | 52.6 | 39.2 | 83.7 |
| Morgan Stanley | MS | 35.6 | 26.8 | 80 |
| Micron | MU | 43.5 | 36.8 | 72.6 |
| Oracle | ORCL | 28.1 | 21.6 | 75.1 |
| Pfizer | PFE | 33.3 | 48.9 | 45 |
| Paypal | PYPL | 76.3 | 83.1 | 77 |
| Starbucks | SBUX | 39.7 | 65.7 | 83.6 |
| AT&T | T | 29.9 | 64.1 | 18.9 |
| Verizon | VZ | 24.1 | 73.6 | 19.1 |
| Walgreens Boots Alliance | WBA | 32.2 | 26.5 | 50.2 |
| Wells Fargo | WFC | 40 | 16.1 | 75.9 |
| Walmart | WMT | 26.9 | 63.6 | 88.1 |
| Exxon-Mobil | XOM | 44.2 | 66.7 | 54.8 |
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 51.12, 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 56.50% and our probability of touch is 83.48%.
Put Side:
Covered Call: GDX August 19, 2022, 28 Calls
Original trade published on 7-18-2022 (click here to see original alert)
Current Comments: As part of our Income Wheel Strategy, we were assigned shares of GDX at the 29 strike. GDX closed the week at 25.59, and is currently trading for 25.74. Our breakeven on the position currently stands at 27.71, so we are down slightly on the position. No worries. Like BITO, GDX offers wonderful opportunities to sell premium and we plan on continuing to take advantage of it.
Call Side:
Covered Call : BITO August 19, 2022, 16 Calls
Original trade published on 7-18-2022 (click here to see original alert)
Current Comments: As part of our Income Wheel Strategy, we were assigned shares of BITO at the 16 strike. BITO closed the week at 13.11, but rallied to over 14 this week. Our breakeven on the position currently stands at 14.62, so we are down slightly on the position. If BITO continues to rally higher we will be in profitable territory in no time, but of course the exact opposite can happen. No worries. BITO offers some excellent premium and we plan on continuing to take advantage of it. To think: BITO collapsed when we first initiated the position and we are only down $0.23 on the position, which speaks volumes about the power of selling premium in perpetuity.
Call Side:
Selling Put: WFC August 19, 2022, 39 Puts
Original trade published on 7-21-2022 (click to see original alert)
Current Comments: At the time of the trade WFC was trading for 42.91. We sold the August 19, 2022, 39 puts for a credit of $0.46. Our probability of success on the trade was 79.10% and the probability of touch was 40.44%.
WFC is now trading higher at 43.28, $4.28 above our 39 put strike. Our breakeven is 38.54. Our probability of success stands at 81.47% and our probability of touch is 35.92%.
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 61.36, but still well above our 57.5 put strike. Our breakeven is 56.80. Our probability of success stands at 79.38%, while our probability of touch is reading 40.10%. Our puts are currently trading at $0.48. Not much has changed from last week. Now it’s just a matter of patience and allowing time decay to work its magic.
Put Side:
Income Trades Portfolio Open Positions
No open positions.
The next Cabot Options Institute – Income Trader issue will be published on July 29, 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.