Cabot Options Institute Income Trader: Alert (PFE)
Since we introduced our PFE position back in early June 2022, we’ve managed to bring in 25.7% worth of premium and capital gains by using our simple income wheel approach. Comparatively, the stock is down 23.1% over the same time frame.
Today I want to hopefully build upon those returns, so I want to buy back our PFE November calls and immediately sell more call premium. We’ve managed to collect almost every penny of premium from our 34 calls and, with 15 days left until expiration, it seems frivolous to continue to hold the position. So, let’s buy our 34 calls back, lock in that premium and immediately sell more options premium.
*As a reminder, 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 who 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 29.84.
Here is the trade:
Buy to Close PFE November 24, 2023, 34 (covered) call for $0.03. (Adjust accordingly, prices may vary from time of alert.)
Once that occurs (or if you are new to the trade and own shares of PFE):
Sell to Open PFE December 15, 2023, 31 (covered) call for $0.62. (Adjust accordingly, prices may vary from time of alert).
Delta of short call: 0.35
Probability of Profit: 67.97%
Probability of Touch: 66.18%
Total net credit: $0.62
Max return (cash-secured): 2.1%
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.