Cabot Options Institute Income Trader – Alert (DKNG, GDX)
I’m selling more premium in DKNG and GDX today. As stated in the weekly report yesterday, January has been a good month so far as we have locked in over 10% worth of options premium through our Income Trader wheel approach. If all goes well this week, we should be able to add to our January totals as our PFE calls are due to expire.
I’m also planning on selling more puts in BITO at some point this week, so for those interested, stay tuned for that alert.
DraftKings (DKNG)
As part of the Income Wheel approach, we allowed our DraftKings (DKNG) calls to expire out of the money at expiration last week.
Today, as our Income Wheel strategy states, we are going to sell more calls against our 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 who 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 37.80.
Here is the trade:
Sell to Open DKNG February 16, 2024, 41 (covered) call for $1.14 (adjust accordingly, prices may vary from time of alert).
Delta of short call: 0.33
Probability of Profit: 72.04%
Probability of Touch: 57.78%
Total net credit: $1.14
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 options premium acquired. Until that point, we will repeatedly sell calls on DKNG.
Gold Miners ETF (GDX)
Just like our trade in DKNG above, as part of the Income Wheel approach, we allowed our Gold Miners (GDX) calls to expire out of the money at expiration last week.
Today, as our Income Wheel strategy states, we are going to sell more calls against our shares in GDX.
GDX is currently trading for 27.84.
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 February 16, 2024, 29 (covered) call for $0.45 (adjust accordingly, prices may vary from time of alert).
Delta of short call: 0.33
Probability of Profit: 69.91%
Probability of Touch: 60.50%
Total net credit: $0.45
Max return (cash-secured): 1.6%
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.
As always, if you have any questions, please feel free to email me at andy@cabotwealth.com.