This week we have two positions due to expire: one in GDX, the other in KO.
Both positions are in the covered call phase of the income wheel strategy and both have calls that look to close in-the-money at the end of this week. If both close in-the-money, we will simply lock in our capital gains, premium and begin the wheel process over again by selling more puts in both positions early next week.
I also intend on adding a new short-term trade to the mix this week. Stay tuned!
More importantly, I hope all of you have a wonderful and safe Thanksgiving!!!
Current Positions
| Open Date | Ticker | Stock Price (open) | Stock Price (current) | Strategy | Trade | Open Price | Current Price | Delta |
| Income Wheel Portfolio - Open Trades | ||||||||
| 11/17/2022 | BITO | $10.14 | $10.17 | Covered Call | December 30, 2022 12 Call | $0.45 | $0.39 | 0.71 |
| 10/17/2022 | GDX | $23.57 | $27.37 | Covered Call | November 25, 2022 26 Call | $0.58 | $1.52 | 0.17 |
| 10/25/2022 | KO | $58.30 | $61.14 | Covered Call | November 25, 2022 60 Call | $0.80 | $1.33 | 0.21 |
| 11/17/2022 | WFC | $46.02 | $46.50 | Selling Puts | December 30, 2022 44 Put | $1.02 | $0.82 | 0.27 |
| 11/3/2022 | PFE | $46.44 | $48.23 | Selling Puts | December 16, 2022 45 Puts | $1.08 | $0.34 | 0.17 |
| Income Trades Portfolio - Open Trades | ||||||||
| Open Date | Close Date | Ticker | Strategy | Trade | Open Price | Closed Price | Profit | Return |
| Income Wheel Portfolio - Closed Trades | ||||||||
| 6/3/2022 | 7/8/2022 | PFE | Short Put | July 8, 2022 50 Put | $0.65 | $0.00 | $0.65 | 1.30% |
| 6/10/2022 | 7/15/2022 | GDX | Short Put | July 15, 2022 29 Put | $0.66 | Assigned at $29 | ($2.75) | -9.48% |
| 6/10/2022 | 7/15/2022 | BITO | Short Put | July 15, 2022 16 Put | $0.82 | Assigned at $16 | ($2.09) | -13.10% |
| 6/22/2022 | 7/21/2022 | WFC | Short Put | July 29, 2022 35 Put | $0.80 | $0.02 | $0.78 | 2.23% |
| 6/30/2022 | 8/10/2022 | KO | Short Put | August 19, 2022 57.5 Put | $0.70 | $0.03 | $0.67 | 1.20% |
| 7/21/2022 | 8/10/2022 | WFC | Short Put | August 19, 2022 39 Put | $0.46 | $0.04 | $0.42 | 1.08% |
| 7/18/2022 | 8/17/2022 | BITO | Covered Call | August 19, 2022 16 Call | $0.50 | $0.03 | $0.47 | 3.59% |
| 7/18/2022 | 8/17/2022 | GDX | Covered Call | August 19, 2022 28 Call | $0.63 | $0.05 | $0.57 | 2.22% |
| 7/11/2022 | 8/23/2022 | PFE | Short Put | August 19, 2022 50 Put | $1.00 | Assigned at $50 | $0.21 | 0.43% |
| 8/17/2022 | 9/7/2022 | BITO | Covered Call | September 23, 2022 16.5 Call | $0.55 | $0.03 | $0.52 | 4.00% |
| 8/17/2022 | 9/7/2022 | GDX | Covered Call | September 23, 2022 28 Call | $0.59 | $0.07 | $0.52 | 2.03% |
| 8/23/2022 | 9/23/2022 | PFE | Covered Call | October 21, 2022 50 Call | $1.50 | $0.09 | $1.41 | 2.82% |
| 8/10/2022 | 9/23/2022 | KO | Short Put | September 23, 2022 60 Put | $0.62 | Assigned at $60 | ($0.78) | -1.30% |
| 8/10/2022 | 9/23/2022 | WFC | Short Put | September 23, 2022 41 Put | $0.61 | Assigned at $41 | $0.02 | 0.05% |
| 9/7/2022 | 10/17/2022 | BITO | Short Put | October 21, 2022 14 Call | $0.40 | $0.03 | $0.37 | 2.60% |
| 9/7/2022 | 10/17/2022 | GDX | Short Put | October 21, 2022 26 Call | $0.70 | $0.04 | $0.66 | 2.50% |
| 9/26/2022 | 10/21/2022 | WFC | Covered Call | October 21, 2022 41 Call | $1.30 | Called away at $41 | $1.89 | 4.67% |
| 9/26/2022 | 10/21/2022 | KO | Covered Call | October 21, 2022 60 Call | $0.70 | $0.00 | $0.70 | 1.20% |
| 9/23/2022 | 1028/2022 | PFE | Covered Call | October 28, 2022 47 Call | $0.56 | Called away at $47 | $3.49 | 7.43% |
| 10/17/2022 | 11/17/2022 | BITO | Covered Call | November 25, 2022 13.5 Call | $0.38 | $0.03 | $0.35 | 2.60% |
| 10/25/2022 | 11/17/2022 | WFC | Short Put | November 25, 2022 43 Puts | $0.96 | $0.07 | $0.89 | 2.00% |
| Income Trades Portfolio - Closed Trades | ||||||||
| 7/26/2022 | 8/17/2022 | JPM | Short Put | September 16, 2022 100 Put | $1.22 | $0.16 | $1.06 | 1.10% |
Weekly High-Probability Mean Reversion Indicator
Here are the various levels I use to determine if an ETF is in an oversold or overbought state.
| Very Overbought | greater than or equal to 80.1 |
| Overbought | 60.1 to 80.0 |
| Neutral | 40.1 to 60 |
| Oversold | 20.1 to 40.0 |
| Very Oversold | less than or equal to 20.0 |
Each week I also include the current implied volatility (IV) and IV Rank. I look for an IV rank above 40, preferably higher.
ETF Watchlist – Weekly Trade Ideas
| Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought | |
| ARK Innovation ETF | ARKK | 63.6 | 41.6 | 45.4 |
| ProShares Bitcoin ETF | BITO | 104.3 | 43.7 | 38.1 |
| iShares MSCI Emerging Markets | EEM | 27.5 | 39.9 | 64.1 |
| iShares MSCI EAFE | EFA | 22.8 | 30.8 | 73.6 |
| iShares MSCI Mexico ETF | EWW | 27.2 | 21.5 | 69.2 |
| iShares MSCI Brazil | EWZ | 57.3 | 76 | 32.9 |
| iShares China Large-Cap | FXI | 49.6 | 56.5 | 61.3 |
| VanEck Gold Miners | GDX | 44.3 | 49.1 | 60.2 |
| SPDR Gold | GLD | 16.4 | 11.1 | 59.9 |
| iShares High-Yield | HYG | 14.1 | 30.5 | 58 |
| SPDR Regional Bank | KRE | 28.3 | 13.2 | 45.3 |
| iShares Silver Trust | SLV | 33.9 | 36.9 | 49.3 |
| iShares 20+ Treasury Bond | TLT | 23.0 | 46.1 | 60.9 |
| United States Oil Fund | USO | 45.9 | 38.3 | 33.5 |
| ProShares Ultra VIX Short | UVXY | 94.8 | 3.2 | 26.4 |
| Barclays S&P 500 VIX ETN | VXX | 64.9 | 6.4 | 27 |
| SPDR Biotech | XLB | 25.0 | 40.6 | 64.5 |
| SPDR Energy Select | XLE | 36.8 | 35.5 | 51.9 |
| SPDR Financials | XLF | 25.5 | 12.7 | 63.3 |
| SPDR Utilities | XLU | 26.2 | 52 | 61.7 |
| SPDR Retail | XRT | 37.6 | 28.5 | 59.4 |
Stock Watchlist – Weekly Trade Ideas
| Ticker Symbol | IV | IV Rank | HPMR Oversold - Overbought | |
| Bank of America | BAC | 32.1 | 9.7 | 54.3 |
| Bristol-Myers | BMY | 23.0 | 12.2 | 55.4 |
| Citigroup | C | 32.6 | 12.7 | 62.6 |
| Costco | COST | 33.6 | 34.7 | 68.7 |
| Cisco Systems | CSCO | 26.5 | 15.6 | 75.9 |
| CVS Health | CVS | 26.1 | 22.1 | 51.8 |
| Dow Inc. | DOW | 38.0 | 45.3 | 52.5 |
| Duke Energy | DUK | 25.1 | 30.5 | 60 |
| Ford | F | 47.7 | 24.9 | 57.2 |
| Gilead Sciences | GILD | 32.3 | 30.7 | 80.9 |
| General Motors | GM | 44.4 | 24.5 | 57.1 |
| Intel | INTC | 40.7 | 45.6 | 59 |
| Johnson & Johnson | JNJ | 18.5 | 11.9 | 67.1 |
| Coca-Cola | KO | 20.6 | 11.4 | 67 |
| Altria Group | MO | 27.1 | 27 | 45.2 |
| Merck | MRK | 23.5 | 14.4 | 72 |
| Marvell Tech. | MRVL | 70.4 | 69.2 | 61.5 |
| Morgan Stanley | MS | 32 | 21.7 | 63.3 |
| Micron | MU | 49.5 | 31.1 | 50.6 |
| Oracle | ORCL | 39.2 | 52.2 | 73.2 |
| Pfizer | PFE | 27.7 | 11 | 58.9 |
| PayPal | PYPL | 50.6 | 24.3 | 48.7 |
| Starbucks | SBUX | 31.8 | 22.1 | 73.3 |
| AT&T | T | 26.1 | 17.9 | 71.2 |
| Verizon | VZ | 25.4 | 33 | 65.2 |
| Walgreens Boots Alliance | WBA | 31.5 | 24.7 | 60.4 |
| Wells Fargo | WFC | 31.2 | 3.7 | 51.2 |
| Walmart | WMT | 21.9 | 15.4 | 72.5 |
| Exxon Mobil | XOM | 34.2 | 25.9 | 52.2 |
Weekly Trade Discussion: Open Positions
Income Wheel Portfolio: Open Positions
Covered Call: GDX November 25, 2022, 26 Calls
Original trade published on 10-17-2022 (click here to see original alert)
Current Comments: We’ve locked in $3, or 10.3% worth of premium, over five trades since GDX was introduced to the portfolio. Our current breakeven point is 26.
Recently, with GDX trading for 23.57, we decided to sell the GDX November 25, 2022 26 calls for $0.58. At the time, the probability of the 26 calls closing out-of-the-money was 76.40%.
Now, with GDX trading higher at 27.37, the probability of success on our 26 calls stands at 18.60%. The 26 calls are worth $1.53. But nothing has changed in our approach. If GDX closes above 26 at November 25 expiration, no worries, we simply lock in profits and start the Income Wheel over again by selling puts in GDX.
Covered Call: BITO December 30, 2022, 12 Calls
Original trade published on 11-17-2022 (click here to see original alert)
Current Comments: We’ve managed to sell and lock in a total of $2.63 worth of premium, or 13.6%, over four trades since introducing this position to the Income Wheel Portfolio. We were assigned the stock for $16 back on July 15, 2022, so most of our premium has come during the covered call phase of our strategy. Our current breakeven stands at 12.99.
Last, with BITO trading for 10.14, and little premium in our November 13.5 calls, we decided to sell the BITO December 30, 2022 12 calls for $0.45.
Now, with BITO trading at 10.17, not much has changed. The price stands at $0.39.
Covered Call: KO November 25, 2022, 60 Calls
Original trade published on 10-25-2022 (click here to see original alert)
Current Comments: We managed to lock in $2.79 worth of premium over four trades. Our breakeven stands at 57.21.
Recently, with KO trading for 58.30, we decided to sell the KO November 25, 2022 60 calls for $0.80. At the time, the probability of the 60 calls closing out-of-the-money was 68.43%.
Now, with KO trading higher at 61.14 and just in-the-money, the probability of success on the trade stands at 22.17%. The current price of our 60 calls stands at roughly $1.34. No worries here—if our 60 calls happen to close in-the-money in 5 days I will be more than happy for our position to be called away, lock in some capital gains and premium and start the wheeling process over again by selling puts in KO.
Selling Puts: WFC December 30, 2022, 44 Puts
Original trade published on 11-17-2022 (click here to see original alert)
Current Comments: We’ve locked in $5.09 worth of premium since introducing WFC to the portfolio back in late June. Our breakeven point, or cost basis on the position, is 35.91.
Last week, with WFC trading for 46.02, we sold puts again, this time at the 44 strike. Now, with WFC trading higher at 46.50, the probability of success stands at 69.46%, and the price of our 44 puts stands at $0.83.
Selling Puts: PFE December 16, 2022, 45 Puts
Original trade published on 11-3-2022 (click here to see original alert)
Current Comments: We’ve managed to lock in $3.62, or 7.24% worth of premium, since introducing PFE to the portfolio. Our breakeven currently stands at 46.38.
Several weeks ago, with PFE trading for 46.44 we started the wheel process over again by selling the 45 puts for $1.08. At the time, the probability of the 45 puts closing out-of-the-money was 61.31%.
Now, with PFE trading higher at 48.23, the probability of success stands at 81.26%, and the price of our 45 puts stands at $0.34.
The next Cabot Options Institute – Income Trader issue will be published on November 28, 2022.