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Fundamentals
Realistic Strategies, Realistic Returns

February 1, 2024

For those who are new and wish to enter a trade, all of the details are listed in the alert (as always) for those wanting to initiate a position. As always, if you have any questions, please do not hesitate to email me at andy@cabotwealth.com.

All-Weather Portfolio Alert - Vanguard Total Stock Market ETF (VTI)

For those who are new and wish to enter a trade, all of the details are listed in the alert (as always) for those wanting to initiate a position. As always, if you have any questions, please do not hesitate to email me at andy@cabotwealth.com.

Our VTI position continues to perform well, up over 37%. The ongoing rally in VTI has pushed the price of the underlying ETF above our short strike and as a result, the delta of our short February 16, 2024, 240 call is nearing parity with our LEAPS position. With 15 days left until the February 16 expiration cycle, I’m going to buy back our short calls in VTI and sell March calls. This will extend our deltas and allow us to take advantage of any continued upside in the ETF.

I will most likely be making similar trades in our IEF and TLT positions tomorrow. Stay tuned!

Vanguard Total Stock Market ETF (VTI)

VTI is currently trading for 241.74.

In the All-Weather portfolio, we currently own the VTI January 17, 2025, 165 call LEAPS contract at $55.05. You must own LEAPS in order to use this strategy.

If you are new to the position and wish to initiate a 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, 215 calls.

COI_F_020124_VTI_LEAPS.png

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 VTI before placing the trade, otherwise you will be naked short calls):

Once you have LEAPS in your possession:

Buy to close VTI February 16, 2024, 240 call for roughly $3.90. (Adjust accordingly, prices may vary from time of alert.)

COI_F_020124_VTI_close.png

Once that occurs:

Sell to open VTI March 15, 2024, 245 call for roughly $3.10. (Adjust accordingly, prices may vary from time of alert.)

COI_F_020124_VTI_open.png

Premium received: 5.6%

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 $55.05 (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.

As always, if you have any questions, please do not hesitate to email me at andy@cabotwealth.com.


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.