Cabot Options Institute Income Trader – Alert (KO, PFE)
Coca-Cola (KO)
Our March 31, 2023, 59 puts are essentially worthless. As a result, I want to lock in the profits and immediately sell more premium.
We added KO to the Income Wheel Portfolio back on June 30, 2022. At the time it was trading for roughly 63, now it trades for 61.75, or down -2.0%. However, by taking the income wheel approach we’ve managed to bring in 8.8% in addition to capital gains, thereby outperforming the individual stock by 13.8%.
KO is currently trading for 61.75.
Here is the trade:
Buy to close KO March 31, 2023, 59 puts for $0.02. (As always, prices will vary, please adjust accordingly.)
Once that occurs (or if you are new to the position):
Sell to Open KO May 19, 2023, 60 puts for $0.76. (As always, prices will vary, please adjust accordingly.)
Delta of short call: 0.30
Probability of Profit: 67.73%
Probability of Touch: 65.39%
Total net credit: $0.76
Max return (cash-secured): 1.3%
Risk Management
We use KO as part of our Income Wheel Portfolio, so if KO closes below our put strike at expiration, we will be assigned shares of KO (per the guidelines of the strategy). Until that point, we will repeatedly sell puts on KO. Of course, any necessary trade alerts/updates will follow.
Pfizer (PFE)
There is little to no premium left in our April 6, 2023, 42 calls. As a result, I want to buy back our April 6, 2023, 42 calls, lock in profits and immediately sell more calls.
We added PFE to the Income Wheel Portfolio back on June 3, 2022. At the time it was trading for roughly 53, now it trades for 40.15, or down -24.2%. However, by taking the income wheel approach we’ve managed to bring in 16.8%, outperforming the individual stock by 37.3%.
*We are not selling naked calls, so you need to have at least 100 shares if you wish to enter a new position in PFE. For those of you that are new to Income Trader and wish to follow along with PFE, buying at least 100 shares of PFE for every call contract you wish to sell is required as we are in the covered call phase of the Income Wheel strategy for PFE.
PFE is currently trading for 40.15.
Here is the trade:
Buy to close PFE April 6, 2023, 42 (covered) call for $0.05 (adjust accordingly, prices may vary from time of alert).
Once that occurs:
Sell to Open PFE May 19, 2023, 42.5 (covered) call for $0.53 (adjust accordingly, prices may vary from time of alert).
Delta of short call: 0.27
Probability of Profit: 75.75%
Probability of Touch: 49.44%
Total net credit: $0.53
Max return (cash-secured): 1.2%
Risk Management
We use PFE as part of our Income Wheel Portfolio, so if PFE 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 PFE.
As always, if you have any questions, please feel free to email me at andy@cabotwealth.com.
