Cabot Options Institute Income Trader: Alert (PFE, KO)
Pfizer (PFE)
Today I want to buy back our PFE October calls and immediately sell more call premium.
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 32.40.
Here is the trade:
Buy to Close PFE October 20, 2023, 35 (covered) call for $0.04. (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 November 24, 2023, 34 (covered) call for $0.62 (adjust accordingly, prices may vary from time of alert).
Delta of short call: 0.33
Probability of Profit: 70.43%
Probability of Touch: 60.89%
Total net credit: $0.62
Max return (cash-secured): 1.9%
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.
Coca-Cola (KO)
I want to buy back our short calls and immediately sell more call premium. We still have 14 days left until our October 27, 2023, 59 calls are due to expire, and they are essentially worthless. As a result, let’s buy them back, lock in some call premium and sell more calls.
KO is currently trading for 53.23.
Here is the trade (we are not selling naked calls; you must own at least 100 shares of KO before placing the trade):
Buy to Close KO October 27, 2023, 59 (covered) call for $0.03. (Adjust accordingly, prices may vary from time of alert.)
Once that occurs:
Sell to Open KO November 24, 2023, 55 (covered) call for $0.75. (Adjust accordingly, prices may vary from time of alert.)
Delta of short call: 0.33
Probability of Profit: 69.02%
Probability of Touch: 62.07%
Total net credit: $0.75
Max return (cash-secured): 1.4%
Risk Management
We use KO as part of our Income Wheel Portfolio, so if KO 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 KO.
As always, if you have any questions, please do not hesitate to email me at andy@cabotwealth.com.
