The portfolio continues to do well in what has been a very difficult market for most traders and their respective portfolios. While I would love to have more trades on, I’m perfectly fine keeping our level at five open trades per expiration cycle with the understanding that as opportunities arise, I will add more. But with a widely vacillating market and a host of bearish crosscurrents I plan on maintaining a fairly conservative approach. That being said, I also plan to add a hedging position to the mix for those that want a little portfolio insurance just in case the market pushes sharply lower. This will also allow us to add a few shorter-term trades to the mix.

Cabot Options Institute – Income Trader Issue: September 12, 2022

Click here to register for the subscriber-exclusive event this upcoming Thursday, September 15 at noon Eastern Time (ET).

The portfolio continues to do well in what has been a very difficult market for most traders and their respective portfolios. While I would love to have more trades on, I’m perfectly fine keeping our level at five open trades per expiration cycle with the understanding that as opportunities arise, I will add more. But with a widely vacillating market and a host of bearish crosscurrents I plan on maintaining a fairly conservative approach. That being said, I also plan to add a hedging position to the mix for those that want a little portfolio insurance just in case the market pushes sharply lower. This will also allow us to add a few shorter-term trades to the mix.

Current Positions

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.

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

Stock Watchlist – Weekly Trade Ideas

Weekly Trade Discussion: Open Positions

Income Wheel Portfolio: Open Positions

Covered Call: PFE October 21, 2022, 50 Calls
Original trade published on 8-23-2022 (click to see original alert)

Current Comments: At the time of the trade, PFE was trading for 48.30. We sold the October 21, 2022, 50 calls for a credit of $1.50.

PFE is now trading for 47.84. As a result, we could lock in almost $0.75 worth of premium and immediately sell more premium. Given that our PFE calls have 40 days left until the October expiration I will most likely buy back our calls if they drop in value a bit more, lock in just over 50% of the original premium sold and immediately sell more calls in PFE.

Our probability of success stands at 71.46% and our probability of touch is 59.24%.

Call Side:

Covered Call: GDX October 21, 2022, 28 Calls
Original 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 25.10. Our total break-even on the position currently stands at 26.55, so with GDX currently trading for 25.10 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 calls stand at 63.07% and the probability of touch is 77.39%.

Call Side:

Covered Call: BITO October 21, 2022, 16.5 Calls
Original 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 14.39. 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 calls stand at 64.46% and the probability of touch is 76.53%.

Call Side:

Selling Put: WFC September 23, 2022, 41 Puts
Original trade published on 8-10-2022 (click to see original alert)

Current Comments: At the time of the trade, WFC was trading for 44.48. We sold the September 23, 2022, 41 puts for a credit of $0.61. Our probability of success on the trade was 75.44% and the probability of touch was 47.48%.

WFC is now trading at 45.33. Our break-even is 40.39. Our probability of success stands at 90.56% and our probability of touch is 18.54%.

I intend to buy back the 41 puts this week and immediately sell more put premium.

Put Side:

Selling Put: KO September 23, 2022, 60 Puts
Original trade published on 8-10-2022 (click to see original alert)

Current Comments: At the time of the trade, KO was trading for 63.15. We sold the September 23, 2022, 60 puts for a credit of $0.62. Our probability of success on the trade was 74.78% and the probability of touch was 49.13%.

KO is now trading at 62.32. Our break-even is 59.38. Our probability of success stands at 79.08%, while our probability of touch is reading 41.23%. Our puts are currently trading for $0.32. Our KO puts have two weeks left until expiration and chances are I will allow these to expire worthless at expiration and immediately sell more puts the following Monday. If I have the opportunity to buy back the 60 puts for $0.15 or less this week, I’ll go ahead and do so and again immediately sell more premium.

Put Side:

The next Cabot Options Institute – Income Trader issue will be published on September 19, 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.