Cabot Options Institute Fundamentals – Alert (VTI, AAPL)
All-Weather Portfolio
Vanguard Total Stock Market (VTI)
We currently own the VTI January 19, 2024, 145 call LEAPS contract at $54.50. You must own LEAPS in order to use this strategy.
Based on our approach, the LEAPS contract that works best is the one with a delta of 0.80: currently the January 17, 2025, 155 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:
Buy to close VTI December 16, 2022, 205 call for roughly $0.05 (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 VTI January 20, 2023, 200 call for roughly $3.10 (adjust accordingly, prices may vary from time of alert)
Premium received: 5.7%
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 $54.50 (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 VTI.
Buffett Patient Investor Portfolio
Apple (AAPL)
We currently own the AAPL January 19, 2024, 130 call LEAPS contract at $54.20. You must own LEAPS in order to use this strategy.
Based on our approach, the LEAPS contract that works best is the one with a delta of 0.80: currently the January 17, 2025, 110 calls. We typically initiate a LEAPS position, with a delta of roughly 0.79, that has roughly 18 to 24 months left until expiration.
Here is the trade:
Buy to close AAPL December 16, 2022, 150 call for roughly $0.02 (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 AAPL January 27, 2023, 147 call for roughly $3.35 (adjust accordingly, prices may vary from time of alert)
Premium received: 6.2%
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 $54.20 (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.