Cabot Options Institute Income Trader - Alert (WFC, DKNG)
Wells Fargo (WFC)
WFC has provided us a nice source of income since we introduced the big bank to the portfolio. We’ve managed to bring in 20.5% of options premium/income in just under one year using the Income Wheel strategy while the stock itself has only made half of that return at just over 10%.
Today I want to buy back our August 25, 2023, 40 puts as they are near worthless, reap the profit and immediately sell more options premium in September.
WFC is currently trading for 46.77.
Here is the trade:
Buy to Close WFC August 25, 2023, 40 puts for $0.09. (As always, prices will vary, please adjust accordingly.)
Once that occurs:
Sell to Open WFC September 15, 2023, 45 puts for $0.85. (As always, prices will vary, please adjust accordingly.)
Delta of short call: 0.30
Probability of Profit: 66.34%
Probability of Touch: 67.05%
Total net credit: $0.85
Max return (cash-secured): 1.9%
Risk Management
We use WFC as part of our Income Wheel Portfolio, so if WFC closes below our put strike at expiration, we will be assigned shares of WFC (per the guidelines of the strategy). Until that point, we will repeatedly sell puts on WFC. As always, any necessary trade alerts/updates will follow.
DraftKings (DKNG)
DKNG continues to trend higher, so we are going to buy back our August puts, lock in profits and immediately sell more puts for the September expiration cycle.
DKNG is currently trading for 30.59.
Here is the trade:
Buy to Close DKNG August 18, 2023, 22.5 put for $0.12. (As always, prices will vary, please adjust accordingly.)
Sell to Open DKNG September 15, 2023, 28 put for $1.36. (As always, prices will vary, please adjust accordingly.)
Delta of short call: 0.29
Probability of Profit: 63.11%
Probability of Touch: 70.26%
Total net credit: $1.36
Max return (cash-secured): 4.8%
Risk Management
We will use DKNG as part of our Income Wheel Portfolio, so if DKNG closes below our put strike at expiration, we will be assigned shares of DKNG (per the guidelines of the strategy). Until that point, we will repeatedly sell puts on DKNG. Of course, any necessary trade alerts/updates will follow.
As always, if you have any questions, please do not hesitate to email me at andy@cabotwealth.com.