We were assigned shares of WFC and KO. As a result, per our income cycle guidelines, we will begin the process of selling calls on both stocks shortly after the opening bell Monday.
Moreover, I plan on adding a new short-term position to the mix early next week. This will not be part of our income cycle portfolio; rather, it’s a short-term play to take advantage of the near-term pop in implied volatility that resides across the board.
Stay tuned for an alert or two over the coming days!
Cabot Options Institute – Income Trader Issue: September 26, 2022
We were assigned shares of WFC and KO. As a result, per our income cycle guidelines, we will begin the process of selling calls on both stocks shortly after the opening bell Monday.
Moreover, I plan on adding a new short-term position to the mix early next week. This will not be part of our income cycle portfolio; rather, it’s a short-term play to take advantage of the near-term pop in implied volatility that resides across the board.
Stay tuned for an alert or two over the coming days!
Current Positions
| Open Date | Ticker | Stock Price (open) | Stock Price (current) | Strategy | Trade | Open Price | Current Price | Delta |
| Income Wheel Portfolio - Open Trades | ||||||||
| 9/23/2022 | PFE | $44.07 | $44.08 | Covered Call | October 28, 2022 47 Call | $0.56 | $0.56 | 0.75 |
| 9/7/2022 | BITO | $11.60 | $11.55 | Covered Call | October 21, 2022 14 Call | $0.40 | $0.22 | 0.8 |
| 9/7/2022 | GDX | $24.12 | $22.44 | Covered Call | October 21, 2022 26 Call | $0.70 | $0.21 | 0.85 |
| 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 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 | 65.8 | 59.2 | 24.7 |
| ProShares Bitcoin ETF | BITO | 90.4 | 29.3 | 35.4 |
| iShares MSCI Emerging Markets | EEM | 31.4 | 36.9 | 16.6 |
| iShares MSCI EAFE | EFA | 32 | 61.4 | 16 |
| iShares MSCI Mexico ETF | EWW | 32.1 | 29.5 | 32.4 |
| iShares MSCI Brazil | EWZ | 49.3 | 69.7 | 45.5 |
| iShares China Large-Cap | FXI | 46.9 | 36.7 | 19.1 |
| VanEck Gold Miners | GDX | 60.2 | 44.5 | 26.1 |
| SPDR Gold | GLD | 19.5 | 28.5 | 23.7 |
| iShares High-Yield | HYG | 24.9 | 69.2 | 19.9 |
| SPDR Regional Bank | KRE | 33.5 | 36 | 27.2 |
| iShares Silver Trust | SLV | 37.7 | 46.5 | 40.9 |
| iShares 20+ Treasury Bond | TLT | 26 | 67.6 | 35.3 |
| United States Oil Fund | USO | 56.7 | 41.5 | 22.9 |
| ProShares Ultra VIX Short | UVXY | 120.9 | 21.1 | 76.1 |
| Barclays S&P 500 VIX ETN | VXX | 82.9 | 23.4 | 61.7 |
| SPDR Biotech | XLB | 33.8 | 66.3 | 17.9 |
| SPDR Energy Select | XLE | 49.4 | 88.8 | 17.6 |
| SPDR Financials | XLF | 32.8 | 48.8 | 18.5 |
| SPDR Utilities | XLU | 26.5 | 70.3 | 23.5 |
| SPDR Retail | XRT | 46.2 | 62.3 | 20.6 |
Stock Watchlist – Weekly Trade Ideas
| Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought | |
| Bank of America | BAC | 44.6 | 63.3 | 24.8 |
| Bristol-Myers | BMY | 31.1 | 53 | 51.7 |
| Citigroup | C | 45.8 | 71.2 | 13.2 |
| Costco | COST | 35.3 | 46.3 | 12.8 |
| Cisco Systems | CSCO | 35.8 | 38.7 | 14 |
| CVS Health | CVS | 32.1 | 48 | 29.5 |
| Dow Inc. | DOW | 43.1 | 84.7 | 15.8 |
| Duke Energy | DUK | 28.8 | 63.9 | 29.3 |
| Ford | F | 61.9 | 49.9 | 13.8 |
| Gilead Sciences | GILD | 36.5 | 43.1 | 34.5 |
| General Motors | GM | 52.3 | 62.5 | 23.2 |
| Intel | INTC | 46.8 | 73.2 | 17.7 |
| Johnson & Johnson | JNJ | 26.4 | 49.8 | 57.1 |
| Coca-Cola | KO | 34.4 | 64 | 21.3 |
| Altria Group | MO | 33.5 | 64.5 | 27.9 |
| Merck | MRK | 29 | 38 | 49.5 |
| Marvell Tech. | MRVL | 62.4 | 57.7 | 23.7 |
| Morgan Stanley | MS | 45.5 | 70.2 | 23.4 |
| Micron | MU | 58.5 | 68.7 | 24.9 |
| Oracle | ORCL | 35.2 | 37.2 | 12.5 |
| Pfizer | PFE | 33.5 | 39.5 | 29.9 |
| PayPal | PYPL | 58.4 | 48.9 | 24.8 |
| Starbucks | SBUX | 39.7 | 66.6 | 30.7 |
| AT&T | T | 37.7 | 85.3 | 16 |
| Verizon | VZ | 33.5 | 93.1 | 26.5 |
| Walgreens Boots Alliance | WBA | 42.4 | 91.3 | 14.8 |
| Wells Fargo | WFC | 45.9 | 54.9 | 21.5 |
| Walmart | WMT | 29.5 | 55.7 | 29.8 |
| Exxon Mobil | XOM | 47.9 | 87.2 | 17.9 |
Weekly Trade Discussion: Open Positions
Income Wheel Portfolio: Open Positions
Covered Call: PFE October 28, 2022, 47 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 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.
Last Friday we locked in $1.41 worth of premium since our PFE October 21, 2022 50 calls were only worth $0.09. We immediately sold more premium going out to the October 28, 2022 expiration cycle for $0.56. Since we just made the trade there really isn’t much more to discuss at the moment.
Call Side:
Covered Call: GDX October 21, 2022, 26 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 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 $0.21 and the probability of success stands at 88.13% and the probability of touch is 24.51%.
If GDX continues to trend lower and our GDX 26 calls reach $0.10 to $0.15, there is a good chance that I will buy back our calls, lock in the premium sold and immediately sell more premium.
Call Side:
Covered Call: BITO October 21, 2022, 14 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 14 calls stand at 85.08% and the probability of touch is 31.17%. The 14 calls are currently worth $0.22.
Just like our GDX calls, if BITO continues to trend lower and our BITO 14 calls reach $0.10 to $0.15, there is a good chance that I will buy back our calls, lock in the premium sold and immediately sell more premium. Until then, I will allow time decay to work its magic.
Call Side:
The next Cabot Options Institute – Income Trader issue will be published on October 3, 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.