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Income Trader
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November 3, 2022

In today’s trade alert I want to start out by selling puts in PFE with the intent of eventually wheeling into the position. Here is a quick review of the wheeling process.

Cabot Options Institute Income Trader – Alert (PFE)

In today’s trade alert I want to start out by selling puts in PFE with the intent of eventually wheeling into the position. Here is a quick review of the wheeling process.

The mechanics are simple:

  • Sell Cash-Secured Puts on a stock until you are assigned shares (100 shares for every put sold),
  • Sell Covered Calls on the assigned stock until the shares are called away
  • Repeat the Process!

All this being said, you can simply just sell puts without the need to wheel into the position. Some of you don’t want to own stock and I get it … which is why we also have an Income Trades Portfolio that is just short-term trades consisting solely of selling puts, with no intent of holding stock.
Anyway …

I’m not going with anything too crazy here. I want to choose highly liquid market stalwarts to sell premium over the long term. These are typically lower-beta stocks with an average implied volatility.

As I stated in my latest webinar, I will be adding several new positions to the mix over the next week or so.

Pfizer (PFE)

COI_IT_110322_PFE_chart.png

IV: 32.5%
IV Rank: 23.3
Expected Move (Range): The expected move (range) for the December 16, 2022, expiration cycle is from 43 to 48.

With PFE trading for 46.44 I want to sell puts going out 43 days.

COI_IT_110322_PFE_puts-2048x219.png

The TradeSell to open PFE December 16, 2022, 45 put strike for a total of $1.08 or higher (As always, the price of spread will vary, please adjust accordingly.)

Delta of spread: -0.35
Probability of Profit: 61.31%
Probability of Touch: 75.14%
Total net credit: $1.08
Max return (cash-secured): 2.4%

Risk Management
If PFE closes below on expiration we will be issued shares at the 45 strike and begin the process of selling calls against it. Until that point, we will continue to sell puts on PFE. Of course, any necessary trade alerts/updates will follow.

If you have any questions, please do not hesitate to email me at andy@cabotwealth.com.

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.