O’Shaughnessy’s Growth/Value Portfolio Alert (TTE)
Our position in TTE is up over 30% since we introduced it back on June 30, 2023. The stock is up only 8.5% over the same time frame. With our short calls currently in-the-money and August expiration tomorrow, I want to buy back our calls for August and immediately sell more calls going out to the October expiration cycle.
TotalEnergies SE (TTE)
TTE is currently trading for 61.33.
In the O’Shaughnessy’s Growth/Value portfolio, we currently own the TTE January 17, 2025, 50 call LEAPS contract at $11.30. You must own LEAPS in order to use this strategy.
*If you are new to the position, based on our approach, the LEAPS contract that works best is the one with a current delta of roughly 0.80: the January 17, 2025, 47.5 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 (you must own LEAPS in TTE before placing the trade, otherwise you will be naked short calls):
Buy to close TTE August 18, 2023, 60 call for roughly $1.35 (adjust accordingly, prices may vary from time of alert)
Once that occurs (or if you are new to the position and already own LEAPS):
Sell to open TTE October 20, 2023, 65 call for roughly $0.90 (adjust accordingly, prices may vary from time of alert)
Premium received: 8.0%
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 $11.30 (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 TTE.
An alternative way to approach a poor man’s covered call, if you are a bit more bullish on the stock, is to buy two LEAPS for every call sold. This way you can benefit from the additional upside past your chosen short strike, yet still participate in the benefits of selling premium.