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Fundamentals
Realistic Strategies, Realistic Returns

December 5, 2023

We have the opportunity to sell premium one more time before we close out our position for 2023.

Cabot Options Institute Fundamentals - Alert (WBA, IBM)

Dogs of the Dow Portfolio Alerts (WBA, IBM)

Walgreens Boots Alliance (WBA)

We have the opportunity to sell premium one more time before we close out our position for 2023.

We currently own the WBA January 17, 2025, 25 call LEAPS contract at $11.10. 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 16, 2026, 12.5 calls.

COI_120523_WBA_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.

WBA is currently trading for 20.45.

Here is the trade (*you must own LEAPS prior to making the trade below):

Sell to open WBA December 29, 2023, 21.5 call for roughly $0.43 (adjust accordingly, prices may vary from time of alert).

COI_120523_WBA_open.png

Premium received: 3.9%

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 $11.10 (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 WBA.

International Business Machines (IBM)

IBM is currently trading for 161.96.

We currently own the IBM January 17, 2025, 105 call LEAPS contract at $43.15. 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 16, 2026, 125 calls. We typically initiate a LEAPS position, with a delta of roughly 0.80, that has about 18 to 24 months left until expiration.

COI_120523_IBM_LEAPS.png

Here is the trade:

Buy to close IBM December 29, 2023, 157.5 call for roughly $5.90. (Adjust accordingly, prices may vary from time of alert.)

COI_120523_IBM_close.png

Once that occurs (and you have LEAPS in your possession):

Sell to open IBM December 29, 2023, 165 call for roughly $1.43. (Adjust accordingly, prices may vary from time of alert.)

COI_120523_IBM_open.png

Premium received: 3.3%

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 $43.15 (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 IBM.

Andy Crowder is a professional options trader, researcher and Chief Analyst of Cabot Options Institute. Formerly with Oppenheimer & Co. in New York, Andy has leveraged his investment experience to develop his statistically based options trading strategy which applies probability theory to option valuations in order to execute risk-controlled trades. This proprietary strategy has been refined through two decades of research and real-world experience and has been featured in the Wall Street Journal, Seeking Alpha, and numerous other financial publications. Andy has helped thousands of option traders learn and implement his meticulous rules-driven options trading strategies through highly attended conferences, one-on-one coaching, webinars, and his work as a financial columnist. He currently resides in Bolton Valley, Vermont and when he’s not trading, teaching and writing about options, he enjoys spending time with his wife and two daughters, backcountry skiing, biking, running and enjoying all things outdoors.