Cabot Options Institute Income Trader – Alert (BITO, GDX)
Our BITO 16.5 calls for the September 23, 2022, expiration cycle are essentially worthless. Same goes for our GDX 28 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 11.60.
IV: 32.2%
IV Rank: 83.3
Expected Move (Range): The expected move for the October 21, 2022, expiration cycle is from roughly 9.5 to 14.
With BITO trading for 11.60 I want to sell calls at the 14 strike, right at the expected move, going out 44 days for roughly $0.41, if not higher. Of course, due to a wide variety of factors, prices may and most likely will vary slightly.
Here is the trade:
Buy to close BITO September 23, 2022, 16.5 call for $0.03
Once that occurs (or if you are new to the trade):
Sell to open BITO October 21, 2022, 14 call strike for a total of $0.41 or higher. (As always, prices will vary, please adjust accordingly.)
Delta of short call: 0.27
Probability of Profit: 80.92%
Probability of Touch: 40.81%
Total net credit: $0.41
Max return (cash-secured): 3.5%
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 24.12.
IV: 43.6%
IV Rank: 63.3
Expected Move (Range): The expected move for the October 21, 2022, expiration cycle is from roughly 22.5 to 25.5.
With GDX trading for 24.12 I want to sell calls at the 26 strike, just above the expected move, going out 44 days for roughly $0.70, if not higher. Of course, due to a wide variety of factors, prices may and most likely will vary slightly.
Here is the trade:
Buy to close GDX September 23, 2022, 28 call for $0.07
Once that occurs (or if you are new to the trade):
Sell to open GDX October 21, 2022, 26 call for a total of $0.70 or higher. (As always, prices will vary, please adjust accordingly.)
Delta of short call: 0.33
Probability of Profit: 72.07%
Probability of Touch: 58.56%
Total net credit: $0.70
Max return (cash-secured): 2.9%
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.