Cabot Options Institute Fundamentals - Alert (JPM, MMM)
Dogs of the Dow Portfolio Alert (JPM, MMM)
JPMorgan Chase (JPM)
Let’s try to lengthen out our deltas a little so we can take advantage of any additional upside prior to the December 29, 2023, expiration cycle. If JPM rallies through the 160 strike, we will gladly close out the position for the year, take our profits, and wait for the new year to reestablish our position.
We currently own the JPM January 17, 2025, 100 call LEAPS contract at $46.20. You must own LEAPS in order to use this strategy.
If you wish to enter the position and are uncertain about which LEAPS to purchase, please refer to the reports section of your subscriber page or our latest subscriber-exclusive webinar in which I go through the process, step by step, of entering a new position of an already established position.
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 16, 2026, 120 calls.
We typically initiate a LEAPS position, with a delta of roughly 0.80, that has about 18 to 24 months left until expiration.
JPM is currently trading for 158.12.
Here is the trade:
Buy to close JPM December 29, 2023, 155 call for roughly $4.55. (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 JPM December 29, 2023, 160 call for roughly $1.46. (Adjust accordingly, prices may vary from time of alert.)
Premium received: 3.2%
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 $46.20 (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 JPM.
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.
Dogs of the Dow Portfolio - 3M (MMM)
We currently own the MMM January 17, 2025, 90 call LEAPS contract at $41.40. 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 16, 2026, 70 calls.
We typically initiate a LEAPS position, with a delta of roughly 0.80, that has about 18 to 24 months left until expiration.
MMM is currently trading for 103.50.
Here is the trade (you must own LEAPS prior to making the trade below):
Buy to close MMM December 29, 2023, 99 call for roughly $5.35. (Adjust accordingly, prices may vary from time of alert.)
Sell to open MMM December 29, 2023, 106 call for roughly $1.13. (Adjust accordingly, prices may vary from time of alert.)
Premium received: 2.7%
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 $41.40 (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 MMM.