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Fundamentals
Realistic Strategies, Realistic Returns

August 8, 2023

August expiration is near, and we need to roll a few positions in our various Fundamentals portfolios. Expect to see several alerts over the coming week as we roll into September and October expiration cycles.

Dogs of the Dow Portfolio Alerts (VZ, AMGN)

August expiration is near, and we need to roll a few positions in our various Fundamentals portfolios. Expect to see several alerts over the coming week as we roll into September and October expiration cycles.

Additionally, Amgen (AMGN) is finally spiking higher after spending most of the year in the doldrums. The move in AMGN over the past several days has managed to push our Dogs of the Dow to higher levels while much of the market has pulled back.

Verizon (VZ)

Verizon is currently trading for 32.65.

In the Dogs of the Dow portfolio, we currently own the VZ January 17, 2025, 30 call LEAPS contract at $10.40. 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, 25 calls. We typically initiate a LEAPS position, with a delta of roughly 0.80, that has roughly 18 to 24 months left until expiration.

COI_F_080823_VZ_LEAPS.png

Here is the trade (you must own LEAPS in VZ before placing the trade, otherwise you will be naked short calls):

Buy to close VZ August 18, 2023, 38 call for roughly $0.02 (adjust accordingly, prices may vary from time of alert)

COI_F_080823_VZ_close.png

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

Sell to open VZ September 22, 2023, 34 call for roughly $0.51 (adjust accordingly, prices may vary from time of alert)

COI_F_080823_VZ_open.png

Premium received: 4.9%

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 $10.40 (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 VZ.

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.

Amgen (AMGN)

AMGN is up over 6% today so we need to make a few adjustments to give our position more room to run.

We currently own the AMGN January 17, 2025, 200 call LEAPS contract at $81.35. 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, 210 calls.

COI_F_080823_AMGN_LEAPS.png

We typically initiate a LEAPS position, with a delta of roughly 0.80, that has about 18 to 24 months left until expiration.

AMGN is currently trading for 262.80.

Here is the trade:

Buy to close the AMGN September 22, 2023, 255 call for roughly $11.85. (Adjust accordingly, prices may vary from time of alert.)

COI_F_080823_AMGN_close.png

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

Sell to open AMGN September 22, 2023, 275 call for roughly $2.47. (Adjust accordingly, prices may vary from time of alert.)

COI_F_080823_AMGN_open.png

Premium received: 3.0%

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 $81.35 (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 AMGN.