Cabot Options Institute Income Trader – Alert (BITO)
ProShares Bitcoin ETF (BITO)
Our BITO 12 calls for the December 30, 2022, expiration cycle are essentially worthless. As a result, I want to buy back our BITO calls, lock in our premium and immediately sell more premium going out 32 days.
BITO is currently trading for 10.31.
IV: 79.39%
IV Rank: 21.2
Expected Move (Range): The expected move for the January 20, 2023, expiration cycle is from roughly 9 to 11.5.
With BITO trading for 10.31, I want to sell calls at the 11.5 strike, just below the expected move, going out 32 days for roughly $0.30, if not higher. Of course, due to a wide variety of factors, prices may and most likely will vary slightly.
Here is the trade:
Buy to close BITO December 30, 2022, 12 call for $0.04
Once that occurs (or if you are new to the trade):
Sell to open BITO January 20, 2023, 11.5 call strike for a total of approximately $0.30. (As always, prices will vary, please adjust accordingly.)
Delta of short call: 0.29
Probability of Profit: 76.23%
Probability of Touch: 49.39%
Total net credit: $0.30
Max return (cash-secured): 2.6%
Risk Management
We use BITO as part of our Income Wheel Portfolio, so if BITO closes above our call strike at expiration, our shares will be called away and, in most cases, we will reap the capital benefits of the stock increase, plus the premium acquired. Until that point, we will repeatedly sell calls on BITO.
