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Income Trader
Reliable Income From Time-Tested Strategies

COI Income Trader Issue: December 18, 2023

We allowed our PFE calls to expire worthless at expiration last Friday, locked in some decent premium and plan to sell more call premium early this week. Expect to see a trade alert either today or tomorrow.

We also allowed our DKNG puts to carry through expiration and as a result, per our income wheel approach, we were assigned shares of DKNG. Now that we are in the covered call phase of the income wheel approach in DKNG, like PFE, we plan to sell calls against our newly acquired shares today or tomorrow.

Additionally, I intend on introducing a new position in WFC, or another fairly low-priced big bank stock, by selling puts early this week. My hope is we get a short-term pullback before entering a new position.

Weekly Commentary

We allowed our PFE calls to expire worthless at expiration last Friday, locked in some decent premium and plan to sell more call premium early this week. Expect to see a trade alert either today or tomorrow.

We also allowed our DKNG puts to carry through expiration and as a result, per our income wheel approach, we were assigned shares of DKNG. Now that we are in the covered call phase of the income wheel approach in DKNG, like PFE, we plan to sell calls against our newly acquired shares today or tomorrow.

Additionally, I intend on introducing a new position in WFC, or another fairly low-priced big bank stock, by selling puts early this week. My hope is we get a short-term pullback before entering a new position.

As I stated last week, and I think it bears repeating one more time since we have a lot of new members on board, the Income Trader service is oftentimes viewed as the tortoise approach. Among many investors today, the slow and steady “tortoise” approach just isn’t sexy. But really, who cares? I certainly don’t, I’m just a nerdy options trader who prefers to sell options with every opportunity, so “sexy” isn’t really in my vocabulary. I care about returns… and more specifically, long-term returns. Returns that offer not only steady growth but sound risk mitigation. And that’s what Income Trader and our income wheel approach offer during both bullish and bearish markets.

Given the conservative approach, returns continue to be exceptional, and if we do indeed see bullish times ahead, it should be of no surprise that returns are even better.

Current Positions

Open DateTickerStock Price (open)Stock Price (current)StrategyTradeOpen PriceCurrent PricePosition Delta
Income Wheel Portfolio - Open Trades
11/13/2023GDX$27.26 $31.81 Covered CallJanuary 19, 2023 29 Call$0.62 $3.00 0.1
11/20/2023BITO$18.81 $19.27 Selling PutsDecember 22, 2023 16.5 Put$0.50 $0.23 0.14
12/5/2023XLU$62.91 $63.53 Selling PutsJanuary 19, 2024 61 Put$0.80 $0.76 0.3
11/27/2023KO$58.36 $58.61 Selling PutsJanuary 19, 2024 57.5 Put$0.76 $0.74 0.35
Open DateClose DateTickerStrategyTradeOpen Price Closed PriceProfitReturn
Income Wheel Portfolio - Closed Trades
6/2/20227/8/2022PFEShort PutJuly 8, 2022 50 Put$0.65 $0.00 $0.65 1.30%
6/10/20227/15/2022GDXShort PutJuly 15, 2022 29 Put$0.66 Assigned at $29($2.75)-9.48%
6/10/20227/15/2022BITOShort PutJuly 15, 2022 16 Put$0.82 Assigned at $16($2.09)-13.10%
6/22/20227/21/2022WFCShort PutJuly 29, 2022 35 Put$0.80 $0.02 $0.78 2.23%
6/30/20228/10/2022KOShort PutAugust 19, 2022 57.5 Put$0.70 $0.03 $0.67 1.20%
7/21/20228/10/2022WFCShort PutAugust 19, 2022 39 Put$0.46 $0.04 $0.42 1.08%
7/18/20228/17/2022BITOCovered Call August 19, 2022 16 Call$0.50 $0.03 $0.47 3.59%
7/18/20228/17/2022GDXCovered Call August 19, 2022 28 Call$0.63 $0.05 $0.57 2.22%
7/11/20228/23/2022PFEShort PutAugust 19, 2022 50 Put$1.00 Assigned at $50$0.21 0.43%
7/26/20228/17/2022JPMShort PutSeptember 16, 2022 100 Put$1.22 $0.16 $1.06 1.10%
8/17/20229/7/2022BITOCovered Call September 23, 2022 16.5 Call$0.55 $0.03 $0.52 4.00%
8/17/20229/7/2022GDXCovered Call September 23, 2022 28 Call$0.59 $0.07 $0.52 2.03%
8/23/20229/23/2022PFECovered Call October 21, 2022 50 Call $1.50 $0.09 $1.41 2.82%
8/10/20229/23/2022KOShort PutSeptember 23, 2022 60 Put$0.62 Assigned at $60($0.78)-1.30%
8/10/20229/23/2022WFCShort PutSeptember 23, 2022 41 Put$0.61 Assigned at $41$0.02 0.05%
9/7/202210/17/2022BITOCovered Call October 21, 2022 14 Call$0.40 $0.03 $0.37 2.60%
9/7/202210/17/2022GDXCovered Call October 21, 2022 26 Call$0.70 $0.04 $0.66 2.50%
9/26/202210/21/2022WFCCovered Call October 21, 2022 41 Call$1.30 Called away at $41$1.89 4.67%
9/26/202210/21/2022KOCovered Call October 21, 2022 60 Call$0.70 $0.00 $0.70 1.20%
9/23/20221028/2022PFECovered Call October 28, 2022 47 Call$0.56 Called away at $47$3.49 7.43%
10/17/202211/17/2022BITOCovered Call November 25, 2022 13.5 Call$0.38 $0.03 $0.35 2.60%
10/25/202211/17/2022WFCShort PutNovember 25, 2022 43 Put$0.96 $0.07 $0.89 2.00%
10/17/202211/25/2022GDXCovered Call November 25, 2022 26 Call$0.58 Called away at $26$1.09 3.87%
10/25/202211/25/2022KOCovered Call November 25, 2022 60 Call$0.80 Called away at $60$2.20 3.75%
11/3/202212/8/2022PFEShort PutDecember 16, 2022 45 Put$1.08 $0.02 $1.06 2.36%
11/17/202212/19/2022BITOCovered Call December 30, 2022 12 Call$0.45 $0.04 $0.41 3.42%
11/17/202212/30/2022WFCShort PutDecember 30, 2022 44 Put$1.02 Assigned at $44($1.37)-3.11%
11/29/20231/9/2023GDXShort PutJanuary 20, 2023 26 Put$0.87 $0.02 $0.85 3.27%
12/8/20221/13/2023PFEShort PutJanuary 13, 2023 49 Put$0.62 Assigned at $49($0.53)-1.08%
12/19/20221/20/2023BITOCovered Call January 20, 2023 11.5 Call$0.30 Called away at $11.5$1.49 14.70%
11/29/20221/20/2023KOShort PutJanuary 20, 2023 60 Put$0.84 $0.00 $0.84 1.40%
1/5/20232/17/2023WFCCovered Call February 17, 2023 45 Call$0.84 Called away at $45$4.23 10.17%
1/9/20232/17/2023GDXShort PutFebruary 17, 2023 29 Put$0.54 Assigned at $29($0.05)-0.10%
1/23/20232/17/2023KOShort PutFebruary 17, 2023 59 Put$0.62 $0.00 $0.62 1.05%
1/23/20232/17/2023BITOShort PutFebruary 17, 2023 13.5 Put$0.52 $0.00 $0.52 3.85%
1/20/20233/1/2023PFECovered Call March 3, 2023 46 Call$1.00 $0.02 $0.98 2.18%
2/22/20233/23/2023BITOShort PutMarch 31, 2023 31 Put$0.50 $0.05 $0.45 3.46%
2/22/20233/29/2023KOShort PutMarch 31, 2023 59 Put$0.86 $0.02 $0.84 1.42%
3/1/20233/29/2023PFECovered Call April 6, 2023 42 Call$0.65 $0.05 $0.60 1.43%
2/21/20233/31/2023GDXCovered Call March 31, 2023 29.5 Call$0.75 Called away at $29.5$1.84 6.48%
2/23/20233/31/2023WFCShort PutMarch 31, 2023 43 Put$0.53 Assigned at $43($4.87)-11.32%
3/29/20234/28/2023KOShort PutMay 19, 2023 60 Puts$0.76 $0.08 $0.68 1.13%
3/29/20234/28/2023PFECovered Call May 19, 2023 42.5 Call$0.53 $0.05 $0.48 1.23%
4/4/20235/8/2023GDXShort PutMay 19, 2023 32 Put$0.78 $0.70 $0.71 2.22%
3/23/20235/18/2023BITOShort PutMay 19, 2023 15 Put$1.10 $0.03 $1.07 7.13%
4/4/20235/24/2023WFCCovered Call May 19, 2023 40 Call$0.55 Called away at $40$3.94 10.76%
4/28/20236/16/2023PFECovered Call June 16, 2023 40 Call$0.63 Called away at $40$1.71 4.40%
3/29/20236/16/2023KOShort PutJune 16, 2023 62.5 Put$0.70 Assigned at $62.5($0.13)-0.21%
5/8/20236/16/2023GDXShort PutJune 16, 2023 34 Put$0.91 Assigned at $34($1.70)-5.00%
5/18/20236/30/2023BITOShort PutJune 30, 2023 14 Put$0.45 $0.01 $0.44 3.14%
5/24/20237/6/2023WFCShort putJuly 21, 2023 37.5 Put$1.01 $0.09 $0.92 2.54%
6/30/20237/24/2023DKNGShort PutAugust 18, 2023 22.5 Put$0.63 $0.09 $0.54 2.40%
7/6/20237/24/2023WFCShort PutAugust 25, 2023 40 Put$0.76 $0.12 $0.64 1.60%
6/21/20238/18/2023PFEShort PutAugust 18, 2023 37.5 Put$0.64 Assigned at $37.5($0.24)-0.64%
6/21/20238/18/2023GDXCovered CallAugust 18, 2023 33 Call$0.52 $0.00 $0.52 1.60%
6/21/20238/18/2023KOCovered Call August 18, 2023 62.5 Call$0.85 $0.00 $0.85 1.40%
6/30/20238/18/2023BITOShort PutAugust 18, 2023 15 Put$0.78 Assigned at $15($0.78)-5.20%
7/24/20239/14/2023DKNGShort PutSeptember 15, 2023 28 Put$1.36 $0.02 $1.34 4.79%
8/21/20239/14/2023PFECovered Call September 29, 2023 38 Call$0.78 $0.02 $0.76 2.00%
8/21/20239/14/2023KOCovered Call September 29, 2023 61 Call$0.78 $0.03 $0.75 1.23%
7/24/20239/15/2023WFCShort PutSeptember 15, 2023 45 Put$0.85 Assigned at $45($1.20)-2.67%
8/21/20239/29/2023BITOCoveredCallSeptember 29, 2023 14 Call$0.48 $0.00 $0.48 3.58%
9/14/202310/13/2023PFECoveredCallOctober 20, 2023 35 Call$0.58 $0.04 $0.54 1.47%
9/14/202310/13/2023KOCoveredCallOctober 27, 2023 59 Call$0.95 $0.03 $0.92 1.49%
9/14/202310/20/2023DKNGShort PutOctober 20, 2023 30 Put$0.98 Assigned at $30($1.95)-6.50%
8/21/202310/20/2023GDXCovered CallOctober 20, 2023 29 Call$0.86 $0.00 $0.86 3.11%
9/18/202310/20/2023WFCCovered CallOctober 20, 2023 44.5 Call$0.89 $0.00 $0.89 2.05%
10/13/202311/9/2023PFECovered Call November 24, 2023 34 Call$0.62 $0.03 $0.59 1.80%
10/23/202311/13/2023GDXCovered Call December 1, 2023 31.5 Call$0.58 $0.04 $0.54 1.80%
10/23/202311/17/2023DKNGCovered Call November 17, 2023 32 Call$0.87 Called away at $32$2.87 9.57%
10/2/202311/17/2023BITOCovered Call November 17, 2023 15 Call$0.47 Called away at $15$0.47 3.13%
10/13/202311/24/2023KOCovered Call November 24, 2023 55 Call$0.75 Called away at $55($6.75)-10.80%
10/23/202312/1/2023WFCCovered CallDecember 1, 2023 41 Call$0.87 Called away at $41($3.13)-6.95%
10/25/202312/5/2023XLUShort PutDecember 15, 2023 56 Put$0.80 $0.02 $0.78 1.39%
11/9/202312/15/2023PFECovered Call December 15, 2023 31 Call$0.62 $0.00 $0.62 2.08%
11/20/202312/15/2023DKNGSelling PutsDecember 15, 2023 36 Put$0.65 Assigned at $36$0.00 0.00%

Weekly High-Probability Mean Reversion Indicator

Below is my watch list of ETFs and stocks with the most liquid options headed into the week of December 18, 2023.

Here are the various levels I use to determine if an ETF is in an oversold or overbought state.

Very Overboughta reading greater than or equal to 80.0
Overboughtgreater than or equal to 60.0
Neutralbetween 40 to 60
Oversoldless than or equal 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

Exchange Traded FundTicker Symbol IVIV Rank HPMR Oversold - Overbought
ARK Innovation ETFARKK41.129.571.4
Proshares Bitcoin ETFBITO77.553.354.4
SPDR Dow JonesDIA10.84.887.7
iShares MSCI Emerging MarketsEEM18.117.865.3
iShares MSCI EAFEEFA12.18.267.7
iShares MSCI Mexico ETFEWW20.924.986.4
iShares MSCI BrazilEWZ31.613.361.1
iShares China Large-CapFXI30.223.140.66
Vaneck Gold MinersGDX31.133.559.2
SPDR Gold GLD13.726.651.5
iShares High-YieldHYG6.912.776.1
iShares Russell 2000IWM21.331.380.4
SPDR Regional BankKRE31.819.179.4
Vaneck Oil ServicesOIH28.711.259.1
Invesco Nasdaq 100QQQ15.80.984.3
iShares Silver TrustSLV26.525.650.8
Vaneck SemiconductorSMH23.714.386.2
SPDR S&P 500 SPY 12.23.274.6
iShares 20+ Treasury BondTLT17.830.882.6
United States Oil FundUSO36.942.148.6
Proshares Ultra VIX ShortUVXY94.813.132.3
CBOE Market Volatility IndexVIX87.547.338.8
Barclays S&P 500 VIX ETNVXX64.813.133.2
SPDR BiotechXLB13.847.379.5
SPDR Energy Select XLE21.016.358.7
SPDR FinancialsXLF14.87.579.6
SPDR UtilitiesXLU17.8852.1
SPDR S&P Oil & Gas ExplorerXOP26.4357.8
SPDR Retail XRT24.328.875.1

Stock Watchlist – Weekly Trade Ideas

Stock - Income TraderTicker Symbol IVIV Rank HPMR Oversold - Overbought
AppleAAPL17.80.969
Bank of AmericaBAC29.522.682.4
Bristol-Myers SquibbBMY25.873.753.7
CitigroupC29.519.373.4
CaterpillarCAT22.89.394.5
ComcastCMCSA27.922.674.9
CostcoCOST18.425.182.6
Cisco SystemsCSCO17.17.567.2
ChevronCVX21.818.870.4
DisneyDIS24.313.758.1
Duke EnergyDUK15.24.767.2
FedexFDX29.532.791.6
Gilead SciencesGILD29.821.155.9
General MotorsGM30.111.679.5
IntelINTC33.516.774.3
Johnson & JohnsonJNJ16.935.050.2
JP MorganJPM20.512.391.6
Coca-ColaKO15.522.645.8
Altria GroupMO16.616.552
MerckMRK19.414.054.5
Morgan StanleyMS24.012.990.7
MicrosoftMSFT20.55.547.8
Nextera EnergyNEE27.036.963.7
NvidiaNVDA35.77.164.9
PfizerPFE26.546.225.1
PaypalPYPL35.823.565.9
StarbucksSBUX19.617.133.4
AT&TT24.830.247.6
VerizonVZ21.724.244.8
Walgreens Boots AllianceWBA55.790.686.9
Wells FargoWFC27.113.290.3
WalmartWMT17.525.443.7
Exxon MobilXOM23.617.251.1

Weekly Trade Discussion: Open Positions

Income Wheel Portfolio: Open Positions

Covered Calls: GDX January 19, 2024, 29 Calls
Original trade published on 11-13-2023 (click here to see original alert)

Current Comments: We sold the January 19, 2024, 29 calls for $0.62. At the time of the alert, GDX was trading for 27.26.

Now, with GDX trading for 30.95, the price of the 29 calls sits at $2.10. There are 33 days left in the January 19, 2024, expiration cycle. We are still early in the trade so there isn’t much to do at the moment other than to allow the price of GDX to vacillate. As it stands, GDX is above its short strike of 29. If GDX closes above its call strike of 29, we will lock in the premium sold and any capital gains on the stock.

COI_IT_121823_GDX.png

Selling Puts: XLU January 19, 2024, 61 Puts
Original trade published on 12-5-2023 (click here to see original alert)

Current Comments: We sold the January 19, 2024, 61 puts for $0.80. At the time of the alert, XLU was trading for 62.91.

Now, with XLU trading for 63.97, the probability of closing at expiration out of the money stands at 76.33%, and the price of the 61 puts sits at roughly $0.53. There are 33 days left in the January 19, 2024, expiration cycle. Not much to say at the moment, other than… so far, so good.

COI_IT_121823_XLU.png

Selling Puts: KO January 19, 2024, 57.5 Puts
Original trade published on 11-27-2023 (click here to see original alert)

Current Comments: We sold the January 19, 2023, 57.5 puts for $0.76. At the time of the alert, KO was trading for 58.36.

Now, with KO trading for 58.60, the probability of closing at expiration out of the money stands at 68.84%, and the price of the 57.5 puts sits at roughly $0.48. There are 33 days left in the January 19, 2024, expiration cycle. There isn’t much to do at the moment other than to allow time decay to work its magic.

COI_IT_121823_KO.png

Selling Puts: BITO December 22, 2023, 16.5 Puts
Original trade published on 11-20-2023 (click here to see original alert)

Current Comments: We sold the December 22, 2023, 16.5 puts for $0.50. At the time of the alert, BITO was trading for 18.81.

Now, with BITO trading for 20.89, the probability of closing at expiration out of the money stands at 91.53%, and the price of the 16.5 puts sits at roughly $0.10. There are 5 days left in the December 22, 2023, expiration cycle. So far, our trade is in great shape. I plan to buy back our puts early next week, lock in profits and immediately sell more put premium.

COI_IT_121823_BITO.png

As always, if you have any questions, please do not hesitate to email me at andy@cabotwealth.com.


The next Cabot Options Institute – Income Trader issue will be

published on December 26, 2023.

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.