Buffett’s Patient Investor Portfolio Alert (GOOGL, AAPL)
We are rolling our last two August 18, 2023, expiration positions into the October 20 expiration cycle. Next week, I hope to add several new positions to our active portfolios … stay tuned!
Alphabet (GOOGL)
GOOGL is currently trading for 126.93.
In the Buffett’s Patient Investor portfolio, we currently own the GOOGL January 17, 2025, 100 call LEAPS contract at $34.45. 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, 105 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 GOOGL before placing the trade, otherwise you will be naked short calls):
Buy to close GOOGL August 18, 2023, 130 call for roughly $0.03. (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 GOOGL October 20, 2023, 135 call for roughly $3.20. (Adjust accordingly, prices may vary from time of alert.)
Premium received: 9.3%
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 $34.45 (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 GOOGL.
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.
Apple (AAPL)
We currently own the AAPL January 17, 2025, 135 call LEAPS contract at $48.00. 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 0.80: the January 17, 2025, 145 calls.
We typically initiate a LEAPS position, with a delta of roughly 0.80, that has about 18 to 24 months left until expiration.
Here is the trade (you must own LEAPS in AAPL before placing the trade, otherwise you will be naked short calls):
AAPL is currently trading at 174.16.
Here is the trade:
Buy to close AAPL August 18, 2023, 200 call for roughly $0.01 or more. (Adjust accordingly, prices may vary from time of alert.)
Once that occurs:
Sell to open AAPL October 20, 2023, 185 call for roughly $2.64. (Adjust accordingly, prices may vary from time of alert.)
Premium received: 5.5%
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 $48.00 (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 AAPL.
As always, if you have any questions, please feel free to email me at andy@cabotwealth.com.