We are up to five positions in our Income Wheel Portfolio and finally approaching a diversified mix of stocks. However, I wouldn’t mind adding at least one or two more to the portfolio over the coming weeks.
Now my focus is on finding a few shorter-term trades using a jade lizard and possibly selling a put or two. If all goes as planned and the market cooperates, expect to see at least one, if not two, shorter-term trades next week.
Cabot Options Institute – Income Trader Issue: July 1, 2022
We are up to five positions in our Income Wheel Portfolio and finally approaching a diversified mix of stocks. However, I wouldn’t mind adding at least one or two more to the portfolio over the coming weeks.
Now my focus is on finding a few shorter-term trades using a jade lizard and possibly selling a put or two. If all goes as planned and the market cooperates, expect to see at least one, if not two, shorter-term trades next week.
Our PFE July 8, 2022 put options is due to expire next Friday. So far, so good. PFE currently sits close to $2.50 above its 50 put strike with a probability of success over 83%.
And then our laddering of positions takes over as we will start to see our positions expire every two weeks or so. My goal is to ladder at least five to 10 positions in the Income Wheel Portfolio so we are collecting premium every few weeks. It’s tough in this current market environment, but that will eventually change. Until then I will continue to take a cautious approach.
Current Positions
| Open Date | Ticker | Stock Price (open) | Stock Price (current) | Strategy | Trade | Open Price | Current Price | Delta |
| Income Wheel Portfolio | ||||||||
| 6/3/2022 | PFE | $53.10 | $52.43 | Sell Put | July 8, 2022 50 Put | $0.65 | $0.19 | 0.15 |
| 6/10/2022 | GDX | $30.76 | $27.38 | Sell Put | July 15, 2022 29 Put | $0.66 | $1.92 | 0.75 |
| 6/10/2022 | BITO | $18.19 | $11.61 | Sell Put | July 15, 2022 16 Put | $0.82 | $4.50 | 0.84 |
| 6/22/2022 | WFC | $38.57 | $39.17 | Sell Put | July 29, 2022 35 Put | $0.80 | $0.58 | 0.19 |
| 6/30/2022 | KO | $62.75 | $62.91 | Sell Put | August 19, 2022 57.5 Put | $0.70 | $0.70 | 0.18 |
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 |
ETF Watchlist
| Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought | |
| ARK Innovation ETF | ARKK | 74.1 | 67.6 | 41 |
| ProShares Bitcoin ETF | BITO | 112.3 | 53.1 | 18.2 |
| iShares MSCI Emerging Markets | EEM | 25.2 | 39.7 | 43.2 |
| iShares MSCI EAFE | EFA | 24.9 | 45.5 | 38.3 |
| iShares MSCI Mexico ETF | EWW | 27 | 22.8 | 28.2 |
| iShares MSCI Brazil | EWZ | 39.4 | 56.8 | 42.9 |
| iShares China Large-Cap | FXI | 37.7 | 33.3 | 62.1 |
| VanEck Gold Miners | GDX | 42.2 | 64.4 | 22.7 |
| SPDR Gold | GLD | 19.5 | 29.1 | 31.9 |
| iShares High-Yield | HYG | 18.6 | 69.5 | 33.9 |
| SPDR Regional Bank | KRE | 33.2 | 44.8 | 38.9 |
| iShares Silver Trust | SLV | 33.3 | 34.8 | 21.9 |
| iShares 20+ Treasury Bond | TLT | 22.6 | 56.7 | 61.4 |
| United States Oil Fund | USO | 48.3 | 34.5 | 36.1 |
| ProShares Ultra VIX Short | UVXY | 110.3 | 3 | 46.6 |
| Barclays S&P 500 VIX ETN | VXX | 67.9 | 0 | 44.4 |
| SPDR Biotech | XLB | 30 | 62.2 | 28.7 |
| SPDR Energy Select | XLE | 49.4 | 79.2 | 32.4 |
| SPDR Financials | XLF | 30.7 | 48.3 | 38.2 |
| SPDR Utilities | XLU | 22.9 | 58.7 | 62 |
| SPDR Retail | XRT | 43.6 | 63.1 | 30.9 |
Stock Watchlist
| Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought | |
| Bank of America | BAC | 42.5 | 56.9 | 24.1 |
| Bristol-Myers | BMY | 26 | 35.2 | 50 |
| Citigroup | C | 43.9 | 62.7 | 34.2 |
| Costco | COST | 34.9 | 44.6 | 60.1 |
| Cisco Systems | CSCO | 32.2 | 47.2 | 35.8 |
| CVS Health | CVS | 30 | 52.7 | 47.9 |
| Dow Inc. | DOW | 42.4 | 82.8 | 22.4 |
| Duke Energy | DUK | 25.6 | 23.1 | 67.3 |
| Ford | F | 59.8 | 48.3 | 28.9 |
| Gilead Sciences | GILD | 29.1 | 17 | 51.8 |
| General Motors | GM | 56.2 | 74 | 32.5 |
| Intel | INTC | 46.6 | 64.7 | 36.1 |
| Johnson & Johnson | JNJ | 23.1 | 8.9 | 53.9 |
| Coca-Cola | KO | 28.4 | 57.4 | 62.6 |
| Altria Group | MO | 38.8 | 78.1 | 22.6 |
| Merck | MRK | 29 | 45.4 | 54.3 |
| Marvell Tech. | MRVL | 63.5 | 62.8 | 26.1 |
| Morgan Stanley | MS | 43.8 | 17.3 | 42.9 |
| Micron | MU | 59.4 | 13 | 28.7 |
| Oracle | ORCL | 33.1 | 36.2 | 54.3 |
| Pfizer | PFE | 34.9 | 50.8 | 65.6 |
| PayPal | PYPL | 77 | 71.3 | 32.1 |
| Starbucks | SBUX | 39.8 | 78.6 | 55.5 |
| AT&T | T | 32.8 | 62.4 | 63.4 |
| Verizon | VZ | 25.7 | 61 | 52.1 |
| Walgreens Boots Alliance | WBA | 35.9 | 56.9 | 24.9 |
| Wells Fargo | WFC | 44 | 52.8 | 42.3 |
| Walmart | WMT | 27 | 7.3 | 44.5 |
| Exxon-Mobil | XOM | 48.6 | 18.4 | 36.2 |
Weekly Trade Discussion: Open Positions
Income Wheel Portfolio Open Positions
Selling Put: PFE July 8, 2022, 50 Puts
Original trade published on 6-3-2022 (click to see original alert)
Current Comments: At the time of the trade PFE was trading for 53.10. We sold the July 8, 2022, 50 puts for a credit of $0.65. Our probability of success on the trade was 73.28% and the probability of touch was 51.35%.
PFE is now trading slightly lower at 52.43, $2.43 above our 50 put strike. Our breakeven is 49.35. Our probability of success stands at 83.81% and our probability of touch is 31.87%.
It looks like we will be selling more puts soon, as our July 8, 2022 50 puts looks to expire worthless. But even if PFE falls next week and closes Friday’s session below 50, no worries, as I plan to wheel PFE. If I’m assigned shares at the 50 strike, I’ll gladly sell calls until my shares are eventually called away and then I’ll repeat the wheel process all over again. By continuing to sell premium we will lower our cost basis on an ongoing basis.
As I’ve said before, my goal is to have at least five to 10 positions in both the Income Wheel Portfolio and the Income Trades Portfolio.
Put Side
Selling Put: GDX July 15, 2022, 29 Puts
Original trade published on 6-10-2022 (click here to see original alert)
Current Comments: At the time of the trade, GDX was trading for 30.76. We sold the July 15, 2022, 29 puts for a credit of $0.66. Our probability of success on the trade was 67.54% and the probability of touch was 62.30%.
GDX is now trading slightly lower at 28.91, $0.09 below our 29 put strike. Our breakeven is 28.34.
Our probability of success stands at 46.69% and our probability of touch is 97.33%.
I’m not really concerned, as I plan to wheel GDX. If I’m assigned shares at the 29 strike, I’ll gladly sell calls until my shares are eventually called away and then I’ll repeat the wheel process all over again. By continuing to sell premium we will lower our cost basis on an ongoing basis.
Put Side
Selling Put: BITO July 15, 2022, 16 Puts
Original trade published on 6-10-2022 (click here to see original alert)
Current Comments: At the time of the trade, BITO was trading for 18.19. We sold the July 15, 2022, 16 puts for a credit of $0.82. Our probability of success on the trade was 64.65% and the probability of touch was 65.50%.
As I stated last week, the timing could not have been worse on this one. BITO is now trading lower at 11.61, $4.39 below our 16 put strike. Since BITO currently sits $4.39 below our 16 put and we sold $0.82 worth of premium we are down $3.57 ($4.39 - $0.82), or 22.3%.
I’m not overly concerned here. Yes, we are certainly down, but I plan to wheel BITO. When I’m assigned shares at the 16 put strike, I’ll gladly accept them and sell calls until my shares are eventually called away and then I’ll repeat the wheel process all over again.
As I stated in the last subscriber-exclusive webinar and elsewhere, I want to have underlying stocks and ETFs with various levels of implied volatility. BITO will certainly be at the extreme side of IV, but I’m OK having a bit of higher-beta exposure, knowing it will be limited to one or two stocks over the two portfolios in the Income Trader service.
Put Side
Selling Put: WFC July 29, 2022, 35 Puts
Original trade published on 6-22-2022 (click to see original alert)
Current Comments: At the time of the trade WFC was trading for 38.57. We sold the July 29, 2022, 35 puts for a credit of $0.80. Our probability of success on the trade was 72.13% and the probability of touch was 53.18%.
WFC is now trading slightly higher at 39.17, $4.17 above our 35 put strike. Our breakeven is 32.10. Our probability of success stands at 77.46% and our probability of touch is 43.28%.
No worries, as I plan to wheel WFC. If I’m assigned shares at the 35 strike, I’ll gladly sell calls until my shares are eventually called away and then I’ll repeat the wheel process all over again.
Put Side
Selling Put: KO August 19, 2022, 57.5 Puts
Original trade published on 6-30-2022 (click to see original alert)
Current Comments: At the time of the trade, KO was trading for 62.75. We sold the August 19, 2022, 57.5 puts for a credit of $0.70. Our probability of success on the trade was 77.88% and the probability of touch was 42.59%.
It’s only been one trading day since I made this trade, so not much has changed. KO is now trading slightly higher at 62.91, $5.41 above our 57.5 put strike. Our breakeven is 56.80. Our probability of success stands at 78.44% and our probability of touch is 41.53%.
If I’m assigned shares at the 57.5 strike, I’ll gladly sell calls until my shares are eventually called away and then I’ll repeat the wheel process all over again. By continuing to sell premium we will lower our cost basis on an ongoing basis.
As I’ve said before, my goal is to have at least five to 10 positions in both the Income Wheel Portfolio and the Income Trades Portfolio.
Put Side
Income Trades Portfolio Open Positions
No open positions.
Next Live Analyst Briefing with Q&A
Our next live analyst briefing with Q&A is scheduled for Thursday, July 14, 2022 at 12 p.m. ET. As always, I will be discussing the options market, have a detailed look at open positions, go over strategies used, and do a follow-up with live questions. I look forward to seeing you all there! Register here.
The next Cabot Options Institute – Income Trader issue will be published on July 8, 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.