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Income Trader
Reliable Income From Time-Tested Strategies

Cabot Options Institute – Income Trader Issue: November 7, 2022

It was another good week for our positions. And now it’s time to finally add a few more positions to the mix. I plan on adding two new positions this week: one to the Income Wheel Portfolio, the other will be a short-term trade with roughly 45-60 days until expiration. There are several good opportunities from our weekly watch list that I’ll be sifting through with the intent to add something mid-week, after the elections have passed.

It was another good week for our positions. And now it’s time to finally add a few more positions to the mix. I plan on adding two new positions this week: one to the Income Wheel Portfolio, the other will be a short-term trade with roughly 45-60 days until expiration. There are several good opportunities from our weekly watch list that I’ll be sifting through with the intent to add something mid-week, after the elections have passed.

Current Positions

Open DateTickerStock Price (open)Stock Price (current)StrategyTradeOpen PriceCurrent PriceDelta
Income Wheel Portfolio – Open Trades
10/17/2022BITO$12.01$13.06Covered CallNovember 25, 2022 13.5 Call$0.38$0.470.58
10/17/2022GDX$23.57$24.95Covered CallNovember 25, 2022 26 Call$0.58$0.600.67
10/25/2022KO$58.30$59.26Covered CallNovember 25, 2022 60 Call$0.80$0.780.59
10/25/2022WFC$45.43$46.74Selling PutsNovember 25, 2022 43 Puts$0.96$0.230.13
11/3/2022PFE$46.44$47.22Selling PutsDecember 16, 2022 45 Puts$1.08$0.800.28
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$0.651.30%
6/10/20227/15/2022GDXShort PutJuly 15, 2022 29 Put$0.66Assigned at $29($2.75)-9.48%
6/10/20227/15/2022BITOShort PutJuly 15, 2022 16 Put$0.82Assigned at $16($2.09)-13.10%
6/22/20227/21/2022WFCShort PutJuly 29, 2022 35 Put$0.80$0.02$0.782.23%
6/30/20228/10/2022KOShort PutAugust 19, 2022 57.5 Put$0.70$0.03$0.671.20%
7/21/20228/10/2022WFCShort PutAugust 19, 2022 39 Put$0.46$0.04$0.421.08%
7/18/20228/17/2022BITOCovered CallAugust 19, 2022 16 Call$0.50$0.03$0.473.59%
7/18/20228/17/2022GDXCovered CallAugust 19, 2022 28 Call$0.63$0.05$0.572.22%
7/11/20228/23/2022PFEShort PutAugust 19, 2022 50 Put$1.00Assigned at $50$0.210.43%
8/17/20229/7/2022BITOCovered CallSeptember 23, 2022 16.5 Call$0.55$0.03$0.524.00%
8/17/20229/7/2022GDXCovered CallSeptember 23, 2022 28 Call$0.59$0.07$0.522.03%
8/23/20229/23/2022PFECovered CallOctober 21, 2022 50 Call$1.50$0.09$1.412.82%
8/10/20229/23/2022KOShort PutSeptember 23, 2022 60 Put$0.62Assigned at $60($0.78)-1.30%
8/10/20229/23/2022WFCShort PutSeptember 23, 2022 41 Put$0.61Assigned at $41$0.020.05%
9/7/202210/17/2022BITOShort PutOctober 21, 2022 14 Call$0.40$0.03$0.372.60%
9/7/202210/17/2022GDXShort PutOctober 21, 2022 26 Call$0.70$0.04$0.662.50%
9/26/202210/21/2022WFCCovered CallOctober 21, 2022 41 Call$1.30Called away at $41$1.894.67%
9/26/202210/21/2022KOCovered CallOctober 21, 2022 60 Call$0.70$0.00$0.701.20%
9/23/20221028/2022PFECovered CallOctober 28, 2022 47 Call$0.56Called away at $47$3.497.43%
Income Trades Portfolio – Closed Trades
7/26/20228/17/2022JPMShort PutSeptember 16, 2022 100 Put$1.22$0.16$1.061.10%

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 ETFARKK58.539.732.8
Proshares Bitcoin ETFBITO62.07.973.5
iShares MSCI Emerging MarketsEEM28.45970.4
iShares MSCI EAFEEFA24.948.866.7
iShares MSCI Mexico ETFEWW26.531.883.1
iShares MSCI BrazilEWZ41.562.964.7
iShares China Large-CapFXI60.982.362.4
Vaneck Gold MinersGDX44.654.758.4
SPDR Gold GLD17.320.164.3
iShares High-YieldHYG15.549.148.5
SPDR Regional BankKRE27.923.258.1
iShares Silver TrustSLV36.852.476.6
iShares 20+ Treasury BondTLT22.848.732.3
United States Oil FundUSO46.144.973.4
Proshares Ultra VIX ShortUVXY93.94.422.8
Barclays S&P 500 VIX ETNVXX60.96.323
SPDR BiotechXLB26.073.566.4
SPDR Energy Select XLE35.335.973.4
SPDR FinancialsXLF25.62663.9
SPDR UtilitiesXLU25.058.962.8
SPDR Retail XRT38.949.948.5

Stock Watchlist – Weekly Trade Ideas

Ticker Symbol IVIV Rank HPMR Oversold - Overbought
Bank of AmericaBAC32.630.376.7
Bristol-MyersBMY22.317.985.5
Citigroup C33.727.752.5
CostcoCOST31.434.846.5
Cisco SystemsCSCO37.655.758.4
CVS HealthCVS25.826.379.6
Dow Inc.DOW37.252.471.7
Duke EnergyDUK26.73962.1
FordF46.733.371.5
Gilead SciencesGILD28.33580.8
General MotorsGM43.428.472.5
Intel INTC40.046.359.2
Johnson & JohnsonJNJ20.328.356.5
Coca-ColaKO22.634.859.5
Altria GroupMO25.92653.5
Merck MRK22.914.563.6
Marvell Tech.MRVL676047.7
Morgan StanleyMS33.130.171.6
MicronMU47.940.762.6
OracleORCL32.547.865.9
PfizerPFE27.117.761.9
PaypalPYPL48.829.320.1
StarbucksSBUX35.852.669.2
AT&TT26.93170.6
VerizonVZ26.241.452.8
Walgreens Boots AllianceWBA30.829.175.4
Wells Fargo WFC31.611.563.9
WalmartWMT29.357.365.1
Exxon-MobilXOM32.831.374.6

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 24.95, the probability of success on our 26 calls stands at 66.29%. The 26 calls are worth $0.60.

COI_IT_110622_GDX-2048x247.png

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 higher at 13.06, the probability of success on the trade stands at 62.36%. The price stands at $0.47. With 19 days left until expiration our position continues to be in great shape!

COI_IT_110622_BITO-2048x252.png

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 59.26 and just out of the money, the probability of success on the trade stands at 61.11%. The current price of our 60 calls stands at roughly $0.79. No worries here—if our 60 calls happen to close in the money in 19 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.

COI_IT_110622_KO-2048x246.png

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.

Last week, 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 46.74, the probability of success stands at 85.55%, and the price of our 43 puts stands at $0.23. A continued push higher and there is a good chance we will buy our puts back and immediately sell more.

COI_IT_110622_WFC-1-2048x263.png

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.

Last week, 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 47.22, the probability of success stands at 68.56%, and the price of our 45 puts stands at $0.80. So far, so good.

COI_IT_110622_PFE-2048x267.png


The next Cabot Options Institute – Income Trader issue will be published on November 14, 2022.

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.