All-Weather Portfolio (GLD, DBC)
Okay, it’s time to start rolling the remainder of our February 16 short calls. I’m going to start with our GLD position in All-Weather and then move on to the Yale Endowment Portfolio followed by the various Dogs of the Dow Portfolios.
I’ve decided to allow our DBC February calls that reside in the All-Weather Portfolio to expire worthless, as I plan to sell more calls early next week.
SPDR Gold Shares ETF (GLD)
GLD is currently trading for 184.14.
In the All-Weather portfolio, we currently own the GLD January 17, 2025, 171 call LEAPS contract at $32.00. 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, 170 calls.
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 GLD before placing the trade, otherwise you will be naked short calls):
Once you have LEAPS in your possession:
Buy to close GLD February 16, 2024, 192 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):
Sell to open GLD March 15, 2024, 188 call for roughly $1.07. (Adjust accordingly, prices may vary from time of alert.)
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 $32.00 (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 GLD.
As always, if you have any questions, please do not hesitate to email at andy@cabotwealth.com.
Yale Endowment Portfolio (VNQ, EEM, EFA, TIP)
Vanguard Real Estate ETF (VNQ)
VNQ is currently trading for 83.19.
In the Yale Endowment portfolio, we currently own the VNQ January 17, 2025, 65 call LEAPS contract at $20.70. 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 roughly 0.80: the January 16, 2026, 65 calls.
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 VNQ before placing the trade, otherwise you will be naked short calls):
Once you have LEAPS in your possession:
Buy to close VNQ February 16, 2024, 87 call for roughly $0.05. (Adjust accordingly, prices may vary from time of alert.)
Once that occurs:
Sell to open VNQ March 15, 2024, 85 call for roughly $1.00. (Adjust accordingly, prices may vary from time of alert.)
Premium received: 4.8%
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 $20.70 (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 VNQ.
iShares MSCI Emerging Market ETF (EEM)
EEM is currently trading for 39.58.
In the Yale Endowment portfolio, we currently own the EEM January 17, 2025, 29 call LEAPS contract at $12.15. 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, 29 calls.
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 EEM before placing the trade, otherwise you will be naked short calls):
Once you have LEAPS in your possession:
Buy to close EEM February 16, 2024, 39 call for roughly $0.67. (Adjust accordingly, prices may vary from time of alert.)
Once that occurs:
Sell to open EEM March 15, 2024, 40.5 call for roughly $0.38. (Adjust accordingly, prices may vary from time of alert.)
Premium received: 3.1%
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 $12.15 (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 EEM.
iShares MSCI EAFE ETF (EFA)
EFA is currently trading for 74.84.
In the Yale Endowment portfolio, we currently own the EFA January 17, 2025, 63 call LEAPS contract at $14.90. 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, 64 calls.
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 EFA before placing the trade, otherwise you will be naked short calls):
Once you have LEAPS in your possession:
Buy to close EFA February 16, 2024, 75 call for roughly $0.29. (Adjust accordingly, prices may vary from time of alert.)
Once that occurs:
Sell to open EFA March 15, 2024, 76 call for roughly $0.65 or more. (Adjust accordingly, prices may vary from time of alert.)
Premium received: 4.4%
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 $14.90 (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 EFA.
iShares Trust TIPS ETF (TIP)
TIP is currently trading for 106.08.
In the Yale Endowment portfolio, we currently own the TIP January 17, 2025, 95 call LEAPS contract at $16.50. 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 16, 2026, 102 calls.
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 TIP before placing the trade, otherwise you will be naked short calls):
Once you have LEAPS in your possession:
Buy to close TIP February 16, 2024, 108 call for roughly $0.03. (Adjust accordingly, prices may vary from time of alert.)
Once that occurs:
Sell to open TIP March 15, 2024, 107 call for roughly $0.59 or more. (Adjust accordingly, prices may vary from time of alert.)
Premium received: 3.6%
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 $16.50 (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 TIP.
Dogs of the Dow Portfolio (AMGN)
I will be rolling the remainder of our February 16, 2024, short call positions tomorrow. Before that, I want to buy back our AMGN March 15, 2024 335 calls (as they are essentially worthless) and immediately sell more call premium against out LEAPS.
AMGN is currently trading for 288.57.
Here is the trade:
In the Dogs of the Dow portfolio, we currently own the AMGN January 16, 2026, 240 call LEAPS contract at $80.20. 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 roughly 0.80: the January 16, 2026, 230 calls.
We typically initiate a LEAPS position that has roughly 18 to 24 months left until expiration.
Here is the trade (you must own LEAPS in AMGN before placing the trade, otherwise you will be naked short calls):
Once you have LEAPS in your possession:
Buy to close AMGN March 15, 2024, 335 call for roughly $0.15 (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 AMGN March 15, 2024, 300 call for roughly $2.30. (Adjust accordingly, prices may vary from time of alert.)
Premium received: 2.9%
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 $80.20 (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 AMGN.
And remember, the 2.9% is just the premium return, it does not include any increases in the LEAPS contract if the stock pushes higher.
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.
Regardless of your approach, again, you can continue to sell calls against your LEAPS as long as you wish. Whether you hold a position for one expiration cycle or 12, poor man’s covered calls give you all the benefits of a covered call for significantly less capital.
As always, if you have any questions, please do not hesitate to email me at andy@cabotwealth.com.
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