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Fundamentals
Realistic Strategies, Realistic Returns

August 11, 2022

Our passive portfolios continue to shine! Our Yale Endowment Portfolio is up over 20% and our most conservative portfolio, the All-Weather Portfolio is up close to 10%. Not bad for just over two months. I’ve found over the years that the most conservative approach is often the best. Less volatility, smooth equity curve, rarely any sleepless nights and over the long term, the results are historically better than more aggressive approaches.

Our passive portfolios continue to shine! Our Yale Endowment Portfolio is up over 20% and our most conservative portfolio, the All-Weather Portfolio is up close to 10%. Not bad for just over two months.

I’ve found over the years that the most conservative approach is often the best. Less volatility, smooth equity curve, rarely any sleepless nights  and over the long term, the results are historically better than more aggressive approaches.

Today I want to roll a few of our positions to bring in more premium, and I want to add a trade or two to our active portfolios. I’m going to start with our passive portfolios and will move towards the trades in both active portfolios either later this afternoon or early tomorrow. I’m going to start light in both active portfolios as the market is in an extreme short-term overbought state. So, like our passive portfolios, we are going to slowly build out each active portfolio over the next few expiration cycles, hoping to have 5-8 positions in both when all is said and done.

But first, let’s get to a few passive portfolio trades. I’m going to start with our Yale Endowment portfolio and follow up with an alert that contains a few All-Weather trades.

YALE ENDOWMENT PORTFOLIO
iShares Emerging Market ETF (EEM)

We currently own the EEM January 19, 2024, 30 call LEAPS contract at $11.50. You must own LEAPS in order to use this strategy.

If you wish to enter the position and are uncertain about which LEAPS to purchase, please refer to the reports section of your subscriber page or our latest subscriber-exclusive webinar in which I go through the process, step by step, of entering a new position of an already established position. Once referring to the reports section, you will find, based on our approach, the LEAPS contracts with a delta of 0.84 are currently the January 19, 2024, 30 calls. We typically initiate a LEAPS position, with a delta of roughly 0.80, that has roughly 18 to 24 months left until expiration.

Here is the trade:

Buy to close EEM August 19, 2022, 42 call for roughly $0.08 (adjust accordingly, prices may vary from time of alert)

COI_F_alert_081122_EEM_close

Once that occurs (or if you are new to the position and already own LEAPS):

Sell to open EEM October 21, 2022, 42 call for roughly $0.94 (adjust accordingly, prices may vary from time of alert)

COI_F_alert_081122_EEM_open

Premium received: 8.2%

Once the initial LEAPS purchase occurs, we maintain the position and focus on selling near-term call premium against our LEAPS, lowering the original cost basis of $11.50 (or the price at which you purchased your LEAPS) with each and every transaction.

We can continue to sell calls against our LEAPS contract every month or so to lower the total capital outlay. But remember, options have a limited life, so when we get closer to the LEAPS contract’s expiration, we will simply sell the contract and use the proceeds to continue our poor man’s covered call strategy in EEM.

iShares TIPS Bond ETF (TIP)

We currently own the TIP January 19, 2024, 100 call LEAPS contract at $17.10. You must own LEAPS in order to use this strategy.

If you wish to enter the position and are uncertain about which LEAPS to purchase, please refer to the reports section of your subscriber page or our latest subscriber-exclusive webinar in which I go through the process, step by step, of entering a new position of an already established position. Once referring to the reports section, you will find, based on our approach, the LEAPS contracts with a delta of 0.81 are currently the January 19, 2024, 90 calls. We typically initiate a LEAPS position, with a delta of roughly 0.80, that has roughly 18 to 24 months left until expiration.

Here is the trade:

Buy to close TIP August 19, 2022, 118 call for roughly $0.05 (adjust accordingly, prices may vary from time of alert)

COI_F_alert_081122_TIP_close

Once that occurs (or if you are new to the position and already own LEAPS):

Sell to open TIP October 21, 2022, 117 call for roughly $0.70 (adjust accordingly, prices may vary from time of alert)

COI_F_alert_081122_TIP_open

Premium received: 4.1%

Once the initial LEAPS purchase occurs, we maintain the position and focus on selling near-term call premium against our LEAPS, lowering the original cost basis of $17.10 (or the price at which you purchased your LEAPS) with each and every transaction.

We can continue to sell calls against our LEAPS contract every month or so to lower the total capital outlay. But remember, options have a limited life, so when we get closer to the LEAPS contract’s expiration, we will simply sell the contract and use the proceeds to continue our poor man’s covered call strategy in TIP.

iShares EAFE ETF (EFA)

We currently own the EFA January 19, 2024, 45 call LEAPS contract at $19.50. You must own LEAPS in order to use this strategy.

If you wish to enter the position and are uncertain about which LEAPS to purchase, please refer to the reports section of your subscriber page or our latest subscriber-exclusive webinar in which I go through the process, step by step, of entering a new position of an already established position. Once referring to the reports section, you will find, based on our approach, the LEAPS contracts with a delta of 0.80 are currently the January 19, 2024, 50 calls. We typically initiate a LEAPS position, with a delta of roughly 0.80, that has roughly 18 to 24 months left until expiration.

Here is the trade:

Buy to close EFA August 19, 2022, 65 call for roughly $1.64 (adjust accordingly, prices may vary from time of alert)

COI_F_alert_081122_EFA_close

Once that occurs (or if you are new to the position and already own LEAPS):

Sell to open EFA October 21, 2022, 69 call for roughly $1.02 (adjust accordingly, prices may vary from time of alert)

COI_F_alert_081122_EFA_open

Premium received: 5.2%

Once the initial LEAPS purchase occurs, we maintain the position and focus on selling near-term call premium against our LEAPS, lowering the original cost basis of $19.50 (or the price at which you purchased your LEAPS) with each and every transaction.

We can continue to sell calls against our LEAPS contract every month or so to lower the total capital outlay. But remember, options have a limited life, so when we get closer to the LEAPS contract’s expiration, we will simply sell the contract and use the proceeds to continue our poor man’s covered call strategy in EFA.