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Fundamentals
Realistic Strategies, Realistic Returns

January 30, 2024

Like most of our bullish-leaning positions, our VZ trade has moved sharply higher since the onset of 2024. We are up over 22% on the trade since we initiated it on January 4, 2024.

Dogs of the Dow Portfolio- Verizon (VZ)

Like most of our bullish-leaning positions, our VZ trade has moved sharply higher since the onset of 2024. We are up over 22% on the trade since we initiated it on January 4, 2024.

VZ is currently trading for 42.51.

In the All-Weather portfolio, we currently own the VTI January 16, 2026, 32 call LEAPS contract at $8.20. 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, 32 calls.

COI_F_013024_VZ_LEAPS.png

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

Once you have LEAPS in your possession:

Buy to close the VZ February 16, 2024, 41 call for roughly $1.78. (Adjust accordingly, prices may vary from time of alert.)

COI_F_013024_VZ_close.png

Once that occurs (or if you are new to the position and already own LEAPS):

Sell to open VZ March 15, 2024, 44 call for roughly $0.51. (Adjust accordingly, prices may vary from time of alert.)

COI_F_013024_VZ_open.png

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 $8.20 (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 VZ.

And remember, the 6.2% 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, 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.


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.