COI Income Trader Issue: February 20, 2024

Weekly Commentary

We locked in a 17.1% gain in DKNG at expiration on Friday. The gain in DKNG and GDX pushed our total return to all-time highs at 143.5%. I plan to continue our wheel-based approach in DKNG by selling puts early last week. As for GDX, we bought back our calls and sold more calls the week before (2/12).

Hopefully, we have the opportunity to add to our total with two trades due to expire at the end of this week. We sold puts in XLU and KO in mid-January and as it stands, both look to expire out-of-the-money. Of course, we need to see how the week plays out, but given our income wheel approach (see image below), with the exception of a crash, we are perfectly fine with whatever occurs. Our ultimate goal is to bring in options premium in a continual basis. How we use that premium is up to each individual. Some may use it for income, others to lower the cost basis of their position, etc.

I plan to add one more position this week so stay tuned for a trade alert, possibly two as we move through the week.

Current Positions

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 February 20, 2024.

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

Selling Puts: XLU February 23, 2024, 61 Puts
Original trade published on 1-11-2024 (click here to see original alert)

Current Comments: We sold the February 23, 2024, 61 puts for $0.65. At the time of the alert, XLU was trading for 62.92.

Now, with XLU trading for 61.23, the probability of closing at expiration out of the money stands at 55.65%, and the price of the 61 puts sits at roughly $0.50. There are 4 days left in the February 23, 2024, expiration cycle. If XLU closes below 61 at expiration in 4 days, no big deal, we simply follow the rules of our income wheel approach and allow ourselves to be assigned the stock. Once the shares are in our possession we will continue to bring in income by selling calls against our newly acquired shares.

Selling Puts: KO February 23, 2024, 59 Puts
Original trade published on 1-11-2024 (click here to see original alert)

Current Comments: We sold the February 23, 2024, 59 puts for $0.70. At the time of the alert, KO was trading for 59.73.

Now, with KO trading for 59.39, the probability of closing at expiration out of the money stands at 66.67%, and the price of the 59 puts sits at roughly $0.20. There are 4 days left in the February 23, 2024, expiration cycle. So far, so good.

Covered Calls: PFE March 22, 2024, 29 Calls
Original trade published on 1-30-2024 (click here to see original alert)

Current Comments: We sold the March 22, 2024, 29 calls for $0.37. At the time of the alert, PFE was trading for 27.38.

Now, with PFE trading for 27.62, the probability of closing at expiration out of the money stands at 74.16%, and the price of the 29 calls sits at roughly $0.38. There are 32 days left in the March 22, 2024, expiration cycle. So far, so good.

Selling Puts: BITO March 15, 2024, 19 Puts
Original trade published on 2-2-2024 (click here to see original alert)

Current Comments: We sold the March 15, 2024, 19 puts for $0.87. At the time of the alert, BITO was trading for 20.33.

Now, with BITO trading for 24.61, the probability of closing at expiration out of the money stands at 89.13%, and the price of the 19 puts sits at roughly $0.18. There are 25 days left in the March 15, 2024, expiration cycle. So far, so good. We continue to reap incredible benefits from our ongoing BITO position. While most have lost money in BITO, since we initiated our position, by using our income approach, we’ve managed to bring in close to 40% in income.

There is a good chance that we will buy back our puts this week, lock in some nice premium and sell even more put premium.

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 February 26, 2024.

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