Please ensure Javascript is enabled for purposes of website accessibility
Income Trader
Reliable Income From Time-Tested Strategies

October 17, 2022

Our BITO 14 calls for the October 21, 2022, expiration cycle are essentially worthless. Same goes for our GDX 26 calls.

Cabot Options Institute Income Trader – Alert (BITO, GDX)

Our BITO 14 calls for the October 21, 2022, expiration cycle are essentially worthless. Same goes for our GDX 26 calls.

As a result, I want to buy back both our BITO and GDX calls, lock in our premium and immediately sell more premium in both. I will also be rolling (selling more premium) the rest of our Income Trader positions over the next few days.

ProShares Bitcoin ETF (BITO)

BITO is currently trading for 12.01.

IV: 32.2%
IV Rank: 13.9
Expected Move (Range): The expected move for the November 25, 2022, expiration cycle is from roughly 10 to 14.

With BITO trading for 12.01 I want to sell calls at the 13.5 strike, just below the expected move, going out 39 days for roughly $0.38, if not higher. Of course, due to a wide variety of factors, prices may and most likely will vary slightly.

COI_IT_101722_BITO_open.png

Here is the trade:

Buy to close BITO October 21, 2022, 14 call for $0.03

Once that occurs (or if you are new to the trade):

Sell to open BITO November 25, 2022, 13.5 call strike for a total of $0.38 or higher. (As always, prices will vary, please adjust accordingly.)

Delta of short call: 0.30
Probability of Profit: 76.16%
Probability of Touch: 49.91%
Total net credit: $0.38
Max return (cash-secured): 2.8%

Risk Management

We use BITO as part of our Income Wheel Portfolio, so if BITO 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 BITO. Of course, any necessary trade alerts/updates will follow.

VanEck Gold Miners ETF (GDX)

GDX is currently trading for 23.57.

IV: 49.4%
IV Rank: 67.2
Expected Move (Range): The expected move for the November 25, 2022, expiration cycle is from roughly 21 to 26.

With GDX trading for 23.57 I want to sell calls at the 26 strike, right at the expected move, going out 39 days for roughly $0.58, if not higher. Of course, due to a wide variety of factors, prices may and most likely will vary slightly.

COI_IT_101722_GDX_open.png

Here is the trade:

Buy to close GDX October 21, 2022, 26 call for $0.04

Once that occurs (or if you are new to the trade):

Sell to open GDX November 25, 2022, 26 call for a total of $0.58 or higher. (As always, prices will vary, please adjust accordingly.)

Delta of short call: 0.28
Probability of Profit: 76.40%
Probability of Touch: 49.28%
Total net credit: $0.58
Max return (cash-secured): 2.2%

Risk Management

We use GDX as part of our Income Wheel Portfolio, so if GDX 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 GDX. Of course, any necessary trade alerts/updates will follow.

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.