We decided to stay on the sidelines last week given the market action, but intend to add several new positions for each of our portfolios this week. As I’ve stated in the past, I don’t plan on ramping up positions quickly; rather, I take a methodical approach to slowly adding a few new positions to the mix. As for our current positions, they remain in good shape. Other than BITO we’ve had a good stretch over the past few months and if all goes well BITO might even join the club, if we continue to allow it.
Current Positions
| Open Date | Ticker | Stock Price (open) | Stock Price (current) | Strategy | Trade | Open Price | Current Price | Delta |
| Income Wheel Portfolio - Open Trades | ||||||||
| 10/17/2022 | BITO | $12.01 | $9.78 | Covered Call | November 25, 2022 13.5 Call | $0.38 | $0.06 | 0.93 |
| 10/17/2022 | GDX | $23.57 | $28.30 | Covered Call | November 25, 2022 26 Call | $0.58 | $2.50 | 0.19 |
| 10/25/2022 | KO | $58.30 | $61.32 | Covered Call | November 25, 2022 60 Call | $0.80 | $1.78 | 0.29 |
| 10/25/2022 | WFC | $45.43 | $47.55 | Selling Puts | November 25, 2022 43 Puts | $0.96 | $0.07 | 0.05 |
| 11/3/2022 | PFE | $46.44 | $47.60 | Selling Puts | December 16, 2022 45 Puts | $1.08 | $0.55 | 0.23 |
| Income Trades Portfolio - Open Trades | ||||||||
| 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 | Short Put | July 8, 2022 50 Put | $0.65 | $0.00 | $0.65 | 1.30% |
| 6/10/2022 | 7/15/2022 | GDX | Short Put | July 15, 2022 29 Put | $0.66 | Assigned at $29 | ($2.75) | -9.48% |
| 6/10/2022 | 7/15/2022 | BITO | Short Put | July 15, 2022 16 Put | $0.82 | Assigned at $16 | ($2.09) | -13.10% |
| 6/22/2022 | 7/21/2022 | WFC | Short Put | July 29, 2022 35 Put | $0.80 | $0.02 | $0.78 | 2.23% |
| 6/30/2022 | 8/10/2022 | KO | Short Put | August 19, 2022 57.5 Put | $0.70 | $0.03 | $0.67 | 1.20% |
| 7/21/2022 | 8/10/2022 | WFC | Short Put | August 19, 2022 39 Put | $0.46 | $0.04 | $0.42 | 1.08% |
| 7/18/2022 | 8/17/2022 | BITO | Covered Call | August 19, 2022 16 Call | $0.50 | $0.03 | $0.47 | 3.59% |
| 7/18/2022 | 8/17/2022 | GDX | Covered Call | August 19, 2022 28 Call | $0.63 | $0.05 | $0.57 | 2.22% |
| 7/11/2022 | 8/23/2022 | PFE | Short Put | August 19, 2022 50 Put | $1.00 | Assigned at $50 | $0.21 | 0.43% |
| 8/17/2022 | 9/7/2022 | BITO | Covered Call | September 23, 2022 16.5 Call | $0.55 | $0.03 | $0.52 | 4.00% |
| 8/17/2022 | 9/7/2022 | GDX | Covered Call | September 23, 2022 28 Call | $0.59 | $0.07 | $0.52 | 2.03% |
| 8/23/2022 | 9/23/2022 | PFE | Covered Call | October 21, 2022 50 Call | $1.50 | $0.09 | $1.41 | 2.82% |
| 8/10/2022 | 9/23/2022 | KO | Short Put | September 23, 2022 60 Put | $0.62 | Assigned at $60 | ($0.78) | -1.30% |
| 8/10/2022 | 9/23/2022 | WFC | Short Put | September 23, 2022 41 Put | $0.61 | Assigned at $41 | $0.02 | 0.05% |
| 9/7/2022 | 10/17/2022 | BITO | Short Put | October 21, 2022 14 Call | $0.40 | $0.03 | $0.37 | 2.60% |
| 9/7/2022 | 10/17/2022 | GDX | Short Put | October 21, 2022 26 Call | $0.70 | $0.04 | $0.66 | 2.50% |
| 9/26/2022 | 10/21/2022 | WFC | Covered Call | October 21, 2022 41 Call | $1.30 | Called away at $41 | $1.89 | 4.67% |
| 9/26/2022 | 10/21/2022 | KO | Covered Call | October 21, 2022 60 Call | $0.70 | $0.00 | $0.70 | 1.20% |
| 9/23/2022 | 1028/2022 | PFE | Covered Call | October 28, 2022 47 Call | $0.56 | Called away at $47 | $3.49 | 7.43% |
| Income Trades Portfolio - Closed Trades | ||||||||
| 7/26/2022 | 8/17/2022 | JPM | Short Put | September 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 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 |
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 | IV | IV Rank | HPMR Oversold - Overbought | |
| ARK Innovation ETF | ARKK | 61.9 | 40.9 | 68.6 |
| Proshares Bitcoin ETF | BITO | 116.0 | 54.6 | 29.9 |
| iShares MSCI Emerging Markets | EEM | 25.1 | 35.3 | 78.3 |
| iShares MSCI EAFE | EFA | 24.5 | 27.3 | 80.7 |
| iShares MSCI Mexico ETF | EWW | 25.3 | 26.8 | 77.9 |
| iShares MSCI Brazil | EWZ | 54.7 | 73.9 | 40.7 |
| iShares China Large-Cap | FXI | 49.1 | 55.1 | 70.4 |
| Vaneck Gold Miners | GDX | 44.2 | 50.7 | 75.3 |
| SPDR Gold | GLD | 17.0 | 14.8 | 79.7 |
| iShares High-Yield | HYG | 15.1 | 41.5 | 65.6 |
| SPDR Regional Bank | KRE | 27.8 | 12.4 | 63.6 |
| iShares Silver Trust | SLV | 34.1 | 46 | 74.6 |
| iShares 20+ Treasury Bond | TLT | 20.7 | 28.4 | 62.2 |
| United States Oil Fund | USO | 41.4 | 22.4 | 55.8 |
| Proshares Ultra VIX Short | UVXY | 90.3 | 1.5 | 31.7 |
| Barclays S&P 500 VIX ETN | VXX | 61.9 | 2.7 | 32.1 |
| SPDR Biotech | XLB | 24.8 | 42.2 | 79 |
| SPDR Energy Select | XLE | 35.4 | 26 | 64.8 |
| SPDR Financials | XLF | 24.7 | 16.1 | 76.1 |
| SPDR Utilities | XLU | 23.8 | 48.3 | 61.9 |
| SPDR Retail | XRT | 36.3 | 21.2 | 70.5 |
Stock Watchlist – Weekly Trade Ideas
| Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought | |
| Bank of America | BAC | 30.3 | 14.5 | 79.3 |
| Bristol-Myers | BMY | 26.1 | 33 | 39.1 |
| Citigroup | C | 32.0 | 16.3 | 80.3 |
| Costco | COST | 33.6 | 33.6 | 72.9 |
| Cisco Systems | CSCO | 37.1 | 49.7 | 55 |
| CVS Health | CVS | 27.1 | 27 | 49.8 |
| Dow Inc. | DOW | 36.3 | 41.2 | 77.2 |
| Duke Energy | DUK | 25.4 | 29.6 | 60.3 |
| Ford | F | 44.9 | 20.4 | 77.1 |
| Gilead Sciences | GILD | 32.9 | 32.3 | 75.7 |
| General Motors | GM | 43.1 | 20.8 | 75.1 |
| Intel | INTC | 40.1 | 43.7 | 71.8 |
| Johnson & Johnson | JNJ | 21.4 | 27.6 | 40.2 |
| Coca-Cola | KO | 21.0 | 20.6 | 71.9 |
| Altria Group | MO | 26.8 | 24.8 | 38.1 |
| Merck | MRK | 23.5 | 14.4 | 41.2 |
| Marvell Tech. | MRVL | 68.4 | 64.3 | 65.2 |
| Morgan Stanley | MS | 31.6 | 20.1 | 78.9 |
| Micron | MU | 46.7 | 29.2 | 77.9 |
| Oracle | ORCL | 35.9 | 43.6 | 70.8 |
| Pfizer | PFE | 26.6 | 9.2 | 62.7 |
| Paypal | PYPL | 49.2 | 25.7 | 69.7 |
| Starbucks | SBUX | 32.7 | 32.2 | 75.3 |
| AT&T | T | 26.5 | 23 | 77.9 |
| Verizon | VZ | 24.9 | 27.6 | 63.9 |
| Walgreens Boots Alliance | WBA | 32.3 | 28.7 | 79.3 |
| Wells Fargo | WFC | 31 | 3.4 | 61.7 |
| Walmart | WMT | 30 | 57.7 | 61.8 |
| Exxon-Mobil | XOM | 33.2 | 23.6 | 65.2 |
Weekly Trade Discussion: Open Positions
Income Wheel Portfolio: Open Positions
Covered Call: GDX November 25, 2022, 26 Calls
Original trade published on 10-17-2022 (click here to see original alert)
Current Comments: We’ve locked in $3, or 10.3% worth of premium, over five trades since GDX was introduced to the portfolio. Our current breakeven point is 26.
Recently, with GDX trading for 23.57, we decided to sell the GDX November 25, 2022 26 calls for $0.58. At the time, the probability of the 26 calls closing out-of-the-money was 76.40%.
Now, with GDX trading higher at 28.3, the probability of success on our 26 calls stands at 26.20%. The 26 calls are worth $2.53. If GDX closes above 26 at November 25 expiration, no worries, we simply lock in profits and start the Income Wheel over again by selling puts in GDX.
Covered Call: BITO November 25, 2022, 13.5 Calls
Original trade published on 10-17-2022 (click here to see original alert)
Current Comments: We’ve managed to sell and lock in a total of $2.18 worth of premium, or 13.6%, over four 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 breakeven stands at 13.44.
Recently, with BITO trading for 12.01, we decided to sell the BITO November 25, 2022 13.5 calls for $0.38. At the time, the probability of the 13.5 calls closing out-of-the-money was 76.16%.
Now, with BITO trading lower at 13.06, the probability of success on the trade stands at 94.87%. The price stands at $0.06. With 11 days left until expiration there is little value left in our 13.5 calls, and therefore I plan on buying back our calls and selling more premium, if indeed we wish to continue with a position in BITO.
Covered Call: KO November 25, 2022, 60 Calls
Original trade published on 10-25-2022 (click here to see original alert)
Current Comments: We managed to lock in $2.79, or 4.65% worth of premium, over four trades. Our breakeven stands at 57.21.
Recently, with KO trading for 58.30, we decided to sell the KO November 25, 2022 60 calls for $0.80. At the time, the probability of the 60 calls closing out-of-the-money was 68.43%.
Now, with KO trading higher at 61.32 and just in-of-the-money, the probability of success on the trade stands at 29.84%. The current price of our 60 calls stands at roughly $1.77. No worries here—if our 60 calls happen to close in-the-money in 11 days I will be more than happy for our position to be called away, lock in some capital gains and premium and start the wheeling process over again by selling some puts in KO.
Selling Puts: WFC November 25, 2022, 43 Puts
Original trade published on 10-25-2022 (click here to see original alert)
Current Comments: We’ve locked in $4.07, or 9.9% worth of premium, since introducing WFC to the portfolio back in late June. Our breakeven point, or cost basis on the position, is 36.93.
Several weeks ago, with WFC trading for 45.43, we started the wheel process over again by selling the 43 puts. At the time, the probability of the 43 puts closing out-of-the-money was 67.12%. Now, with WFC trading higher at 47.55, the probability of success stands at 93.71%, and the price of our 43 puts stands at $0.07. As a result of such little premium left in our 43 puts, there is a good chance we will buy our puts back and immediately sell more this week.
Selling Puts: PFE December 16, 2022, 45 Puts
Original trade published on 11-3-2022 (click here to see original alert)
Current Comments: We’ve managed to lock in $3.62, or 7.24% worth of premium, since introducing PFE to the portfolio. Our breakeven currently stands at 46.38.
Several weeks ago, with PFE trading for 46.44 we started the wheel process over again by selling the 45 puts for $1.08. At the time, the probability of the 45 puts closing out-of-the-money was 61.31%.
Now, with PFE trading higher at 47.60, the probability of success stands at 86.74%, and the price of our 45 puts stands at $0.15. Like our WFC puts, with such little premium left in our 45 puts, there is a good chance we will simply buy our puts back and immediately sell more this week.
The next Cabot Options Institute – Income Trader issue will be published on November 21, 2022.