Cabot Options Institute Income Trader: Alert (GDX, WFC, DKNG)
Gold Miners ETF (GDX)
We allowed our calls to expire worthless, thereby reaping all of the call premium. Now it’s time to start selling more call premium.
GDX is currently trading for 29.42.
Here is the trade (we are not selling naked calls; you must own at least 100 shares of GDX before placing the trade):
Sell to Open GDX December 1, 2023, 31.5 (covered) call for $0.58 (adjust accordingly, prices may vary from time of alert).
Delta of short call: 0.30
Probability of Profit: 73.44%
Probability of Touch: 53.76%
Total net credit: $0.58
Max return (cash-secured): 2.0%
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.
Wells Fargo (WFC)
We allowed our calls to expire worthless, thereby reaping all of the call premium. Now it’s time to start selling 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 WFC. For those of you that are new to Income Trader and wish to follow along with WFC, buying at least 100 shares of WFC for every call contract you wish to sell is required as we are in the covered call phase of the Income Wheel strategy for WFC.
WFC is currently trading for 40.02.
Here is the trade:
Sell to Open WFC December 1, 2023, 41 (covered) call for $0.87 (adjust accordingly, prices may vary from time of alert).
Delta of short call: 0.40
Probability of Profit: 62.74%
Probability of Touch: 75.40%
Total net credit: $0.87
Max return (cash-secured): 2.2%
Risk Management
We use WFC as part of our Income Wheel Portfolio, so if WFC 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 WFC.
DraftKings (DKNG)
As part of the Income Wheel approach, we allowed our DraftKings (DKNG) puts to expire in the money at expiration last week. As a result, we were issued shares at our chosen put strike of 30.
Today, as our Income Wheel strategy states, we are going to sell calls against our newly issued shares in DKNG.
We are not selling naked calls, so you need to have at least 100 shares if you wish to enter a new position in DKNG. For those of you that are new to Income Trader and wish to follow along with DKNG, buying at least 100 shares of DKNG for every call contract you wish to sell is required as we are in the covered call phase of the Income Wheel strategy for DKNG.
DKNG is currently trading for 28.43.
Here is the trade:
Sell to Open DKNG November 17, 2023, 32 (covered) call for $0.87 (adjust accordingly, prices may vary from time of alert).
Delta of short call: 0.30
Probability of Profit: 76.39%
Probability of Touch: 49.32%
Total net credit: $0.87
Max return (cash-secured): 3.1%
Risk Management
We use DKNG as part of our Income Wheel Portfolio, so if DKNG 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 DKNG.
As always, if you have any questions, please feel free to email me at andy@cabotwealth.com.
