Before I get started, I wanted to thank all of you that wrote in this week. I’ve received kind words across all four of my services and I greatly appreciate it. I hope you will all find my services and statistical approach to options useful for years to come. As I stated in our most recent webinar, if you have any feedback, comments or question please do not hesitate to email me at andy@cabotwealth.com.
Monday saw a historic amount of selling pressure. In fact, fewer than five stocks in the S&P 500 were able to eke out a gain on the day.
And it only got worse.
Cabot Options Institute – Income Trader Issue: June 17, 2022
Before I get started, I wanted to thank all of you that wrote in this week. I’ve received kind words across all four of my services and I greatly appreciate it. I hope you will all find my services and statistical approach to options useful for years to come. As I stated in our most recent webinar, if you have any feedback, comments or question please do not hesitate to email me at andy@cabotwealth.com.
Monday saw a historic amount of selling pressure. In fact, fewer than five stocks in the S&P 500 were able to eke out a gain on the day.
And it only got worse.
The stretch from last Friday to Tuesday was one of the worst three-day selloffs in market history. The move officially pushed the market into bear market territory. Now the question is, how will market participants respond? So far, not great.
On Wednesday, the Fed raised interest rates by 75 basis points and what was left of the “buy the dip” crowd managed to push the market fractionally higher on the session. The bullishness was short-lived as the bears took over at the opening bell on Thursday and never let up. The S&P 500 closed down 3.31% on the trading session.
My hope was to add a few more positions this past week, but with the market experiencing a waterfall effect, I thought it might be best to sit on the sidelines. Remember, we never want to force trades just for the sake of trading. That’s a short-sighted approach. Opportunities will always be there; we just might have to wait from time to time for those opportunities to present themselves … and that’s okay.
Current Positions
| Open Date | Ticker | Stock Price (open) | Stock Price (current) | Strategy | Trade | Open Price | Current Price | Current Return | Delta |
| Income Wheel Portfolio | |||||||||
| 6/3/2022 | PFE | $53.10 | $47.48 | Sell Put | 7/8/22 50 Put | $0.65 | $3.06 | -3.74% | 0.5 |
| 6/10/2022 | GDX | $30.76 | $30.78 | Sell Put | 7/15/22 29 Put | $0.66 | $0.77 | -0.38% | 0.29 |
| 6/10/2022 | BITO | $18.19 | $12.92 | Sell Put | 7/15/22 16 Put | $0.82 | $3.65 | -14.13% | 0.28 |
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 | 82.1 | 80.3 | 35.5 |
| Proshares Bitcoin ETF | BITO | 138.2 | 77.5 | 14.2 |
| iShares MSCI Emerging Markets | EEM | 29 | 54.1 | 32 |
| iShares MSCI EAFE | EFA | 26.5 | 53.8 | 23.3 |
| iShares MSCI Mexico ETF | EWW | 34.4 | 52.1 | 20.9 |
| iShares MSCI Brazil | EWZ | 46.7 | 79.2 | 19.6 |
| iShares China Large-Cap | FXI | 45.6 | 56.9 | 45.8 |
| Vaneck Gold Miners | GDX | 46.6 | 73.8 | 43.7 |
| SPDR Gold | GLD | 20.5 | 34.1 | 53.9 |
| iShares High-Yield | HYG | 23.1 | 83.4 | 31.6 |
| SPDR Regional Bank | KRE | 40 | 58.7 | 23.5 |
| iShares Silver Trust | SLV | 34.1 | 39.1 | 54.7 |
| iShares 20+ Treasury Bond | TLT | 29.8 | 81.5 | 40.5 |
| United States Oil Fund | USO | 45.8 | 28.1 | 48.5 |
| Proshares Ultra VIX Short | UVXY | 152.2 | 32.4 | 62.9 |
| Barclays S&P 500 VIX ETN | VXX | 92.5 | 17 | 63.6 |
| SPDR Biotech | XLB | 33.2 | 70.7 | 16 |
| SPDR Energy Select | XLE | 50.3 | 103.1 | 19.1 |
| SPDR Financials | XLF | 35.5 | 62.8 | 20.8 |
| SPDR Utilities | XLU | 27.5 | 77.8 | 15.3 |
| SPDR Retail | XRT | 49.4 | 75.8 | 28.9 |
Stock Watchlist
| Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought | |
| Bank of America | BAC | 44.3 | 63.5 | 23 |
| Bristol-Myers | BMY | 26.7 | 41.7 | 22.6 |
| Citigroup | C | 47.6 | 73.6 | 33.6 |
| Costco | COST | 39.8 | 59.2 | 38.4 |
| Cisco Systems | CSCO | 34.9 | 42.8 | 36.6 |
| CVS Health | CVS | 33.8 | 60.6 | 25.2 |
| Dow Inc. | DOW | 41.9 | 77.1 | 6.3 |
| Duke Energy | DUK | 29 | 93.5 | 11.6 |
| Ford | F | 66.5 | 71 | 24 |
| Gilead Sciences | GILD | 38.1 | 41.4 | 19.1 |
| General Motors | GM | 59.2 | 85.2 | 26.8 |
| Intel | INTC | 43.7 | 67.4 | 23.1 |
| Johnson & Johnson | JNJ | 26 | 68.4 | 30.9 |
| Coca-Cola | KO | 32.6 | 86.5 | 31.1 |
| Altria Group | MO | 36.1 | 82 | 12.2 |
| Merck | MRK | 28.3 | 51.3 | 20.5 |
| Marvell Tech. | MRVL | 70.1 | 72.9 | 21.3 |
| Morgan Stanley | MS | 48.4 | 82.8 | 21.8 |
| Micron | MU | 62.5 | 82.2 | 15.9 |
| Oracle | ORCL | 38.5 | 45.6 | 45.7 |
| Pfizer | PFE | 37.8 | 66.8 | 22.5 |
| Paypal | PYPL | 67.9 | 70 | 28.6 |
| Starbucks | SBUX | 45.8 | 87.8 | 31.3 |
| AT&T | T | 37.1 | 85.9 | 11.9 |
| Verizon | VZ | 33.3 | 77.4 | 22.7 |
| Walgreens Boots Alliance | WBA | 42.8 | 91.1 | 23.7 |
| Wells Fargo | WFC | 51.1 | 70.2 | 20.7 |
| Walmart | WMT | 30.6 | 63.6 | 35.7 |
| Exxon-Mobil | XOM | 45.4 | 80.7 | 27.7 |
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 47.48, $2.52 below our 50 put strike. Since we sold $0.65 worth of credit we are currently down, $1.87, or -3.74%.
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 ten 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 higher at 30.78, $1.78 above our 29 put strike. Since GDX currently sits above our 29 put, we’re currently in a position to reap the entire credit. Of course, we still have 28 days left until expiration.
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%.
Wow, the timing could not have been worse on this one. BITO is now trading lower at 12.92, $3.08 below our 16 put strike. Since BITO currently sits $3.08 below our 16 put, and we sold $0.82 worth of premium we are down, $2.26 ($3.08 - $0.82), or 14.13%.
Like our other two positions, I plan to wheel BITO. If I’m assigned shares at the 16 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 stated in the webinar on Thursday, 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 okay 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
Income Trades Portfolio Open Positions
No open positions.
Next Live Analyst Briefing with Q&A
Our first live analyst briefing with Q&A is scheduled for Thursday, July 14, 2022 at 12 p.m. ET. 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. But I also want to take some time to go through the ins and outs of the service and what to expect going forward, so I’ll probably go a little longer than usual, possibly upwards of 45 minutes to an hour, potentially longer if we have lots of questions…and I hope we do. Register here.
The next Cabot Options Institute – Income Trader issue will be published on June 24, 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.