It’s going to be a fairly busy week for trading.
We have four positions that are due to expire at the October 21, 2022 expiration cycle, three of which have little to no premium. As a result, I intend to buy back our calls in GDX, BITO, and KO on Monday or Tuesday. I’ll plan on doing the same in our PFE calls that are due to expire October 28.
My hope is to add several more positions to the Income Wheel portfolio this week as opportunities are plentiful.
Cabot Options Institute – Income Trader Issue: October 10, 2022
It’s going to be a fairly busy week for trading.
We have four positions that are due to expire at the October 21, 2022 expiration cycle, three of which have little to no premium. As a result, I intend to buy back our calls in GDX, BITO, and KO on Monday or Tuesday. I’ll plan on doing the same in our PFE calls that are due to expire October 28.
My hope is to add several more positions to the Income Wheel portfolio this week as opportunities are plentiful.
We’ve seen a market down roughly 25% to 35% depending on the major market index you’re tracking. In some high-quality, blue-chip stocks we have the opportunity to sell premium roughly 15% to 20% below current prices. So, if you are indeed looking for the potential to establish some long-term positions at historically low prices, now might be the opportunity of a lifetime.
Current Positions
| Income Wheel Portfolio - Open Trades | ||||||||
| 9/23/2022 | PFE | $44.07 | $42.32 | Covered Call | October 28, 2022 47 Call | $0.56 | $0.08 | 0.94 |
| 9/7/2022 | BITO | $11.60 | $11.96 | Covered Call | October 21, 2022 14 Call | $0.40 | $0.07 | 0.89 |
| 9/7/2022 | GDX | $24.12 | $24.39 | Covered Call | October 21, 2022 26 Call | $0.70 | $0.33 | 0.75 |
| 9/26/2022 | KO | $57.89 | $54.51 | Covered Call | Octboer 21, 2022 60 Call | $0.70 | $0.05 | 0.96 |
| 9/26/2022 | WFC | $39.77 | $41.79 | Covered Call | Octboer 21, 2022 41 Call | $1.30 | $2.10 | 0.42 |
| 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 | Assgined at $41 | $0.02 | 0.05% |
| 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 IndicatorHere 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 | 66.9 | 59.9 | 37.3 |
| Proshares Bitcoin ETF | BITO | 76.1 | 20.9 | 43.5 |
| iShares MSCI Emerging Markets | EEM | 28.2 | 51.7 | 38.7 |
| iShares MSCI EAFE | EFA | 29.1 | 55.9 | 40.5 |
| iShares MSCI Mexico ETF | EWW | 30.5 | 47.1 | 49.9 |
| iShares MSCI Brazil | EWZ | 50.1 | 70.7 | 63.5 |
| iShares China Large-Cap | FXI | 43.2 | 40.1 | 39 |
| Vaneck Gold Miners | GDX | 52 | 64.3 | 49.3 |
| SPDR Gold | GLD | 19.7 | 29.5 | 53.7 |
| iShares High-Yield | HYG | 19.6 | 70.6 | 41.9 |
| SPDR Regional Bank | KRE | 35.3 | 48.3 | 43.2 |
| iShares Silver Trust | SLV | 37.9 | 51.7 | 55 |
| iShares 20+ Treasury Bond | TLT | 25.5 | 75.3 | 30.6 |
| United States Oil Fund | USO | 53.4 | 44.2 | 75.2 |
| Proshares Ultra VIX Short | UVXY | 116.2 | 19.2 | 64.5 |
| Barclays S&P 500 VIX ETN | VXX | 82 | 27.4 | 61.8 |
| SPDR Biotech | XLB | 35.3 | 71.8 | 41.8 |
| SPDR Energy Select | XLE | 44.8 | 67.2 | 70.6 |
| SPDR Financials | XLF | 33.4 | 56.5 | 39.4 |
| SPDR Utilities | XLU | 31.3 | 93.5 | 24.1 |
| SPDR Retail | XRT | 44.8 | 69.6 | 41.8 |
Stock Watchlist – Weekly Trade Ideas
| Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought | |
| Bank of America | BAC | 46.3 | 70.5 | 37.5 |
| Bristol-Myers | BMY | 30.9 | 62.2 | 38.5 |
| Citigroup | C | 48.5 | 79.9 | 33.5 |
| Costco | COST | 36 | 47.8 | 33.6 |
| Cisco Systems | CSCO | 34.5 | 57.1 | 34.2 |
| CVS Health | CVS | 39.9 | 83.7 | 20.6 |
| Dow Inc. | DOW | 43.9 | 79.1 | 39.4 |
| Duke Energy | DUK | 33.9 | 100.1 | 21.4 |
| Ford | F | 61.8 | 64.9 | 43.1 |
| Gilead Sciences | GILD | 37.4 | 52.2 | 52.1 |
| General Motors | GM | 57.6 | 79.1 | 37.7 |
| Intel | INTC | 58.3 | 98.6 | 28.8 |
| Johnson & Johnson | JNJ | 26.8 | 77 | 30.6 |
| Coca-Cola | KO | 29.9 | 74.9 | 17.9 |
| Altria Group | MO | 33 | 70 | 57.8 |
| Merck | MRK | 29.4 | 30.4 | 54.2 |
| Marvell Tech. | MRVL | 63.5 | 60.9 | 35.9 |
| Morgan Stanley | MS | 47 | 78.6 | 34.9 |
| Micron | MU | 53.3 | 58 | 52.6 |
| Oracle | ORCL | 35.6 | 43.5 | 38.8 |
| Pfizer | PFE | 36.8 | 52.8 | 23 |
| Paypal | PYPL | 66.9 | 56.6 | 47.8 |
| Starbucks | SBUX | 46.1 | 89.8 | 47.7 |
| AT&T | T | 38.7 | 97.3 | 25.2 |
| Verizon | VZ | 35.1 | 101.6 | 26.4 |
| Walgreens Boots Alliance | WBA | 49.2 | 107.7 | 27.4 |
| Wells Fargo | WFC | 47.3 | 61 | 47.1 |
| Walmart | WMT | 30 | 74 | 34.1 |
| Exxon-Mobil | XOM | 42.9 | 67.2 | 73.3 |
Weekly Trade Discussion: Open Positions
Income Wheel Portfolio: Open Positions
Covered Call: PFE October 28, 2022, 47 CallsOriginal trade published on 9-23-2022 (click to see original alert)
Current Comments: At the time of the trade, PFE was trading for 44.07. We sold the October 28, 2022, 47 calls for a credit of $0.56. We’ve locked in a total of $3.06 worth of premium.
Several weeks ago we decided to sell premium going out to the October 28, 2022 expiration cycle for $0.56. The premium in our 47 calls now stands at $0.08 with 19 days left until expiration. The probability of success stands at 94.32%.
I intend to buy back our calls early this week and immediately sell more call premium.
Call Side:
Covered Call: GDX October 21, 2022, 26 CallsOriginal trade published on 9-7-2022 (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 during the July expiration cycle. At the time GDX was trading for 25.59, and it is currently trading for 24.00. Our total break-even on the position currently stands at 26.55, so with GDX currently trading for 24.00 we are down slightly on the position. No worries. Like BITO (see below), GDX offers wonderful opportunities to sell premium due to its high IV and we plan on continuing to take advantage of it.
We recently sold the October 21, 2022, 26 calls for $0.70. At the time the probability of success of the 26 calls was 72.07%. Now the 26 calls are worth $0.33 and the probability of success stands at 77.82%, and the probability of touch is 45.54%.
If GDX pushes lower and our GDX 26 calls reach $0.10 to $0.15 this week, there is a good chance that I will buy back our calls, lock in the premium sold and immediately sell more premium. If not, I will most likely hold through expiration in 12 days.
Call Side:
Covered Call: BITO October 21, 2022, 14 CallsOriginal trade published on 9-7-2022 (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 at 13.11 at the end of July expiration, but now stands at 11.90. Our total break-even on the position currently stands at 14.02.
We recently sold the October 21, 2022, 14 calls for $0.40. At the time the probability of success of the 14 calls was 80.92%. Now the 14 calls stand at 91.37% and the probability of touch is 17.69%. The 14 calls are currently worth $0.08.
I intend to buy back our calls early this week and immediately sell more call premium.
Call Side:
Covered Call: KO October 21, 2022, 60 CallsOriginal trade published on 9-26-2022 (click here to see original alert)
Current Comments: As part of our Income Wheel Strategy, we were assigned shares of KO at the 60 strike. KO closed at 57.89 at the end of September expiration, but now stands at 55.14.
We recently sold the October 21, 2022, 60 calls for $0.70. Now the 60 calls stand at 96.51% and the probability of touch is 7.06%. The 60 calls are currently worth $0.05.
I intend to buy back our calls early this week and immediately sell more call premium.
Call Side:
Covered Call: WFC October 21, 2022, 41 CallsOriginal trade published on 9-26-2022 (click here to see original alert)
Current Comments: As part of our Income Wheel Strategy, we were assigned shares of WFC at the 41 strike. WFC closed at 39.77 at the end of September expiration, but now stands at 41.98.
We recently sold the October 21, 2022, 41 calls for $1.30. Now the 41 calls stand at 45.57% and the probability of touch is 87.78%. The 41 calls are currently worth $2.10.
If WFC closes at expiration in 12 days above our call strike, our 41 calls will be “called” away. As a result, we will lock in any premium and capital gains. I plan on selling more puts to establish a new wheel position if the aforementioned situation plays out.
If not, and WFC closes at expiration below our 41 calls, no worries, I’ll simply sell more calls in November or possibly December.
Call Side:
The next Cabot Options Institute – Income Trader issue will be published on October 17, 2022.