Cabot Options Institute Income Trader Alert – Pfizer (PFE)
Our PFE calls expired last week and since we are in the covered call phase of our income wheel approach, I want to sell a few more calls against our shares today, going out 38 days.
I plan on introducing a new position in BITO later this afternoon/early Wednesday morning and possibly even another before the week ends.
Pfizer (PFE)
Since we introduced our PFE position back in early June 2022, we’ve managed to bring in 29.4% worth of premium and capital gains by using our simple income wheel approach. Comparatively, the stock is down roughly 47.5% over the same time frame.
Not bad, for one of our more conservative, lower-beta positions. Remember, in Income Trader, I not only want to diversify the portfolio with uncorrelated stocks, I also want to diversify the levels of implied volatility of the various stocks/ETFs that reside in the portfolio.
Today, I want to hopefully build upon our 29.4% return, so I want to sell more call premium against our shares.
*As a reminder, we are not selling naked calls, so you need to have at least 100 shares if you wish to enter a new position in PFE. For those of you who are new to Income Trader and wish to follow along with PFE, buying at least 100 shares of PFE for every call contract you wish to sell is required as we are in the covered call phase of the Income Wheel strategy for PFE.
PFE is currently trading for 27.38.
Here is the trade:
Sell to Open PFE March 24, 2024, 29 (covered) call for $0.37. (Adjust accordingly, prices may vary from time of alert).
Delta of short call: 0.27
Probability of Profit: 75.62%
Probability of Touch: 50.31%
Total net credit: $0.37
Max return (cash-secured): 1.4%
Risk Management
We use PFE as part of our Income Wheel Portfolio, so if PFE 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 PFE.
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