Weekly Commentary
*Note: With next Tuesday being the Fourth of July holiday, Cabot has graciously given us next Monday, July 3, off as well as sort of a midyear mini-break on the heels of a chaotic – but quite profitable – first half of 2023. So, your next issue of Cabot Options Institute Income Trader will arrive in your inbox next Wednesday, July 5.
We sold put premium in PFE and (covered) call premium in GDX and KO last week. And with the market pulling back last week and out of a short-term overbought state, I intend to add even more premium to our plate. We will be adding one, if not two, positions to the mix.
Last week I stated my goal was to bring in total potential returns of roughly 10% to 12.5% per expiration cycle. By adding a few stocks/ETFs we should be able to reach that target.
Right now the average implied volatility (IV) of the five stocks in our Income Wheel portfolio sits at 32.2%. BITO is at the high side of the IV range at just over 56% and KO makes up the lower portion of the IV range at 14.8%. The other three stocks (GDX, PFE, WFC) float between 25% to 35%.
As a result, I want to sell puts in a few stocks/ETFs with an IV around 32%, if not slightly higher. ARKK (37.7%) and KRE (39.9%) are the two ETFs at the top of my list. As for stocks, MU currently sits at the top of the list with an IV hovering around 43%. Of course, our watch list can change quickly, so it wouldn’t be a surprise to see a few alternative tickers make an appearance in the alert. As always, I’ll let Mr. Market dictate what is best.
With the market pulling back last week and out of a short-term overbought state, now is as good a time as any to dip our toes into a position or two.
As it stands, after the June 16, 2023 expiration cycle, our total return is 90.03%, or 7.5% per expiration cycle.
Current Positions
| Open Date | Ticker | Stock Price (open) | Stock Price (current) | Strategy | Trade | Open Price | Current Price | Delta |
| Income Wheel Portfolio - Open Trades | ||||||||
| 5/24/2023 | WFC | $40.77 | $42.18 | Short Put | July 21, 2023 37.5 Put | $1.01 | $0.35 | 0.17 |
| 6/21/2023 | PFE | $39.34 | $38.30 | Short Put | August 18, 2023 37.5 Put | $0.64 | $0.45 | 0.38 |
| 6/21/2023 | GDX | $30.14 | $29.79 | Covered Call | August 18, 2023 33 Call | $0.52 | $0.41 | 0.78 |
| 6/21/2023 | KO | $61.26 | $61.20 | Covered Call | August 18, 62.5 Call | $0.85 | $0.78 | 0.63 |
| 5/18/2023 | BITO | $15.65 | $14.78 | Short Put | June 30, 2023 14 Put | $0.45 | $0.04 | 0.05 |
| 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 | Assigned at $41 | $0.02 | 0.05% |
| 9/7/2022 | 10/17/2022 | BITO | Covered Call | October 21, 2022 14 Call | $0.40 | $0.03 | $0.37 | 2.60% |
| 9/7/2022 | 10/17/2022 | GDX | Covered Call | October 21, 2022 26 Call | $0.70 | $0.04 | $0.66 | 2.50% |
| 9/26/2022 | 10/21/2022 | WFC | Covered Call | October 21, 2022 41 Call | $1.30 | Called away at $41 | $1.89 | 4.67% |
| 9/26/2022 | 10/21/2022 | KO | Covered Call | October 21, 2022 60 Call | $0.70 | $0.00 | $0.70 | 1.20% |
| 9/23/2022 | 1028/2022 | PFE | Covered Call | October 28, 2022 47 Call | $0.56 | Called away at $47 | $3.49 | 7.43% |
| 10/17/2022 | 11/17/2022 | BITO | Covered Call | November 25, 2022 13.5 Call | $0.38 | $0.03 | $0.35 | 2.60% |
| 10/25/2022 | 11/17/2022 | WFC | Short Put | November 25, 2022 43 Put | $0.96 | $0.07 | $0.89 | 2.00% |
| 10/17/2022 | 11/25/2022 | GDX | Covered Call | November 25, 2022 26 Call | $0.58 | Called away at $26 | $1.09 | 3.87% |
| 10/25/2022 | 11/25/2022 | KO | Covered Call | November 25, 2022 60 Call | $0.80 | Called away at $60 | $2.20 | 3.75% |
| 11/3/2022 | 12/8/2022 | PFE | Short Put | December 16, 2022 45 Put | $1.08 | $0.02 | $1.06 | 2.36% |
| 11/17/2022 | 12/19/2022 | BITO | Covered Call | December 30, 2022 12 Call | $0.45 | $0.04 | $0.41 | 3.42% |
| 11/17/2022 | 12/30/2022 | WFC | Short Put | December 30, 2022 44 Put | $1.02 | Assigned at $44 | ($1.37) | -3.11% |
| 11/29/2023 | 1/9/2023 | GDX | Short Put | January 20, 2023 26 Put | $0.87 | $0.02 | $0.85 | 3.27% |
| 12/8/2022 | 1/13/2023 | PFE | Short Put | January 13, 2023 49 Put | $0.62 | Assigned at $49 | ($0.53) | -1.08% |
| 12/19/2022 | 1/20/2023 | BITO | Covered Call | January 20, 2023 11.5 Call | $0.30 | Called away at $11.5 | $1.49 | 14.70% |
| 11/29/2022 | 1/20/2023 | KO | Short Put | January 20, 2023 60 Put | $0.84 | $0.00 | $0.84 | 1.40% |
| 1/5/2023 | 2/17/2023 | WFC | Covered Call | February 17, 2023 45 Call | $0.84 | Called away at $45 | $4.23 | 10.17% |
| 1/9/2023 | 2/17/2023 | GDX | Short Put | February 17, 2023 29 Put | $0.54 | Assigned at $29 | ($0.05) | -0.10% |
| 1/23/2023 | 2/17/2023 | KO | Short Put | February 17, 2023 59 Put | $0.62 | $0.00 | $0.62 | 1.05% |
| 1/23/2023 | 2/17/2023 | BITO | Short Put | February 17, 2023 13.5 Put | $0.52 | $0.00 | $0.52 | 3.85% |
| 1/20/2023 | 3/1/2023 | PFE | Covered Call | March 3, 2023 46 Call | $1.00 | $0.02 | $0.98 | 2.18% |
| 2/22/2023 | 3/23/2023 | BITO | Short Put | March 31, 2023 31 Put | $0.50 | $0.05 | $0.45 | 3.46% |
| 2/22/2023 | 3/29/2023 | KO | Short Put | March 31, 2023 59 Put | $0.86 | $0.02 | $0.84 | 1.42% |
| 3/1/2023 | 3/29/2023 | PFE | Covered Call | April 6, 2023 42 Call | $0.65 | $0.05 | $0.60 | 1.43% |
| 2/21/2023 | 3/31/2023 | GDX | Covered Call | March 31, 2023 29.5 Call | $0.75 | Called away at $29.5 | $1.84 | 6.48% |
| 2/23/2023 | 3/31/2023 | WFC | Short Put | March 31, 2023 43 Put | $0.53 | Assigned at $43 | ($4.87) | -11.32% |
| 3/29/2023 | 4/28/2023 | KO | Short Put | May 19, 2023 60 Puts | $0.76 | $0.08 | $0.68 | 1.13% |
| 3/29/2023 | 4/28/2023 | PFE | Covered Call | May 19, 2023 42.5 Call | $0.53 | $0.05 | $0.48 | 1.23% |
| 4/4/2023 | 5/8/2023 | GDX | Short Put | May 19, 2023 32 Put | $0.78 | $0.70 | $0.71 | 2.22% |
| 3/23/2023 | 5/18/2023 | BITO | Short Put | May 19, 2023 15 Put | $1.10 | $0.03 | $1.07 | 7.13% |
| 4/4/2023 | 5/24/2023 | WFC | Covered Call | May 19, 2023 40 Call | $0.55 | Called away at $40 | $3.94 | 10.76% |
| 4/28/2023 | 6/16/2023 | PFE | Covered Call | June 16, 2023 40 Call | $0.63 | Called away at $40 | $1.71 | 4.40% |
| 3/29/2023 | 6/16/2023 | KO | Short Put | June 16, 2023 62.5 Put | $0.70 | Assigned at $62.5 | ($0.13) | -0.21% |
| 5/8/2023 | 6/16/2023 | GDX | Short Put | June 16, 2023 34 Put | $0.91 | Assigned at $34 | ($1.70) | -5.00% |
| 88.93% | ||||||||
| Income Trader Portfolio | ||||||||
| 7/26/2022 | 8/17/2022 | JPM | Short Put | September 16, 2022 100 Put | $1.22 | $0.16 | $1.06 | 1.10% |
| 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 | 37.7 | 3.6 | 39.5 |
| Proshares Bitcoin ETF | BITO | 54.7 | 23.1 | 80.8 |
| iShares MSCI Emerging Markets | EEM | 15.9 | 9.1 | 33.7 |
| iShares MSCI EAFE | EFA | 14.4 | 13.5 | 32.9 |
| iShares MSCI Mexico ETF | EWW | 19.1 | 7.9 | 37.3 |
| iShares MSCI Brazil | EWZ | 28.6 | 3.8 | 64.8 |
| iShares China Large-Cap | FXI | 28.3 | 5.0 | 32.9 |
| Vaneck Gold Miners | GDX | 29.9 | 0.6 | 28.2 |
| SPDR Gold | GLD | 12.7 | 0.9 | 31.8 |
| iShares High-Yield | HYG | 7.3 | 0.1 | 34.6 |
| SPDR Regional Bank | KRE | 39.9 | 24.7 | 29.8 |
| iShares Silver Trust | SLV | 26.4 | 4.0 | 26.9 |
| iShares 20+ Treasury Bond | TLT | 15.1 | 1.7 | 57.9 |
| United States Oil Fund | USO | 35.0 | 16.2 | 44 |
| Proshares Ultra VIX Short | UVXY | 101.0 | 28.7 | 26.3 |
| Barclays S&P 500 VIX ETN | VXX | 71.1 | 19.6 | 24 |
| SPDR Biotech | XLB | 16.2 | 0.6 | 46.3 |
| SPDR Energy Select | XLE | 24.2 | 2.1 | 31.6 |
| SPDR Financials | XLF | 17.0 | 1.3 | 38.1 |
| SPDR Utilities | XLU | 15.1 | 1.3 | 34.4 |
| SPDR Retail | XRT | 24.0 | 0.2 | 49.6 |
Stock Watchlist – Weekly Trade Ideas
| Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought | |
| Bank of America | BAC | 32.0 | 18.6 | 25.8 |
| Bristol-Myers | BMY | 19.3 | 11.5 | 45.4 |
| Citigroup | C | 28.7 | 9 | 28.9 |
| Costco | COST | 16.6 | 1.5 | 61.7 |
| Cisco Systems | CSCO | 16.8 | 4.5 | 43.8 |
| CVS Health | CVS | 22.4 | 8.5 | 51.2 |
| Dow Inc. | DOW | 23.9 | 8.9 | 39.9 |
| Duke Energy | DUK | 18.9 | 8.4 | 36.4 |
| Ford | F | 34.6 | 8.4 | 59.5 |
| Gilead Sciences | GILD | 24.3 | 16.6 | 44 |
| General Motors | GM | 32.3 | 5.9 | 45.9 |
| Intel | INTC | 39.1 | 25.7 | 48.1 |
| Johnson & Johnson | JNJ | 15.6 | 6.1 | 83.7 |
| Coca-Cola | KO | 13.1 | 3.2 | 51.2 |
| Altria Group | MO | 14.8 | 2.4 | 32.3 |
| Merck | MRK | 18.9 | 2.5 | 73.7 |
| Marvell Tech. | MRVL | 41.8 | 1.2 | 39.1 |
| Morgan Stanley | MS | 28.9 | 19.2 | 30.7 |
| Micron | MU | 43 | 26 | 35.8 |
| Oracle | ORCL | 23.6 | 14.3 | 55.3 |
| Pfizer | PFE | 21.2 | 8.5 | 37 |
| Paypal | PYPL | 35 | 3.5 | 57.7 |
| Starbucks | SBUX | 21.7 | 7.7 | 35.3 |
| AT&T | T | 26.5 | 27.4 | 31.3 |
| Verizon | VZ | 21.9 | 18.7 | 42.9 |
| Walgreens Boots Alliance | WBA | 34.4 | 31.9 | 43.9 |
| Wells Fargo | WFC | 33 | 22.5 | 33.6 |
| Walmart | WMT | 14 | 0.6 | 61.7 |
| Exxon-Mobil | XOM | 25.7 | 3.9 | 32.2 |
Weekly Trade Discussion: Open Positions
Income Wheel Portfolio: Open Positions
Selling Puts: BITO June 30, 2023, 14 Puts
Original trade published on 5-18-2023 (click here to see original alert)
Current Comments: We sold the June 30, 2023, 14 puts for $0.45. At the time of the alert, BITO was trading for 15.65.
Now, with BITO trading for 17.41, the probability of success stands at 95%, and the price of the 14 puts sits at roughly $0.04. I intend on buying back our puts this week and immediately selling more puts going out to the August expiration.
Selling Puts: WFC July 21, 2023, 37.5 Puts
Original trade published on 5-24-2023 (click here to see original alert)
Current Comments: We sold the July 21, 2023, 37.5 puts for $1.01. At the time of the alert, WFC was trading for 40.77.
Now, with WFC trading for 40.16, the probability of success stands at 80.43%, and the price of the 37.5 puts sits at $0.35. There are 26 days left in the July 21, 2023 expiration cycle, but, as it stands, so far, so good.
Selling Puts: PFE August 18, 2023, 37.5 Puts
Original trade published on 6-21-2023 (click here to see original alert)
Current Comments: We sold the August 18, 2023, 37.5 puts for $0.64. At the time of the alert, PFE was trading for 39.34.
Now, with PFE trading for 38.30, the probability of success stands at 58.02%, and the price of the 37.5 puts sits at $0.97. There are 54 days left in the August 18, 2023 expiration cycle, but, as it stands, so far, so good.
Covered Calls: GDX August 18, 2023, 33 Calls
Original trade published on 6-21-2023 (click here to see original alert)
Current Comments: We sold the August 18, 2023, 33 calls for $0.52. At the time of the alert, GDX was trading for 30.14.
Now, with GDX trading for 29.79, the probability of success stands at 81.42%, and the price of the 33 calls sits at $0.41. There are 54 days left in the August 18, 2023 expiration cycle, but, as it stands, just like our other Income Wheel positions, so far, so good.
Covered Calls: KO August 18, 2023, 62.5 Calls
Original trade published on 6-21-2023 (click here to see original alert)
Current Comments: We sold the August 18, 2023, 62.5 calls for $0.85. At the time of the alert, KO was trading for 61.26.
Now, with KO trading for 61.20, the probability of success stands at 64.77%, and the price of the 62.5 calls sits at $0.78. There are 54 days left in the August 18, 2023 expiration cycle, but, as it stands, just like our other Income Wheel positions, so far, so good.
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 July 5, 2023.