Dogs of the Dow Portfolio Alert (INTC, CVX)
Intel (INTC)
Our Small Dogs of the Dow portfolio continues to push higher as a result of the latest rally. More specifically, our INTC position is up 40% since we initiated it back at the beginning of 2023. The underlying stock position is only up 20%, again, showing the power of using a poor man’s covered call strategy on individual stocks and ETFs.
We currently own the INTC January 17, 2025, 17.5 call LEAPS contract at $11.40. 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 17, 2025, 25 calls.
We typically initiate a LEAPS position, with a delta of roughly 0.80, that has about 18 to 24 months left until expiration.
INTC is currently trading for 33.49.
Here is the trade:
Buy to close the INTC July 21, 2023, 36 call for roughly $0.09 (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 the INTC August 18, 2023, 36 call for roughly $0.81 (adjust accordingly, prices may vary from time of alert)
Premium received: 7.1%
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 $11.40 (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 INTC.
Chevron (CVX)
We currently own the CVX January 17, 2025, 125 call LEAPS contract at $59.80. You must own LEAPS in order to use this strategy.
That being said, based on our approach, the LEAPS contract that works best is the one with a current delta of 0.80: the January 17, 2025, 120 calls.
We typically initiate a LEAPS position, with a delta of roughly 0.80, that has roughly 18 to 24 months left until expiration.
CVX is currently trading for 154.36.
Here is the trade:
Buy to close CVX July 28, 2023, 165 call for roughly $0.30 (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 CVX August 18, 2023, 160 call for roughly $2.24 (adjust accordingly, prices may vary from time of alert)
Premium received: 3.7%
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 $59.80 (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 CVX.
As always, please do not hesitate to email me with any questions at andy@cabotwealth.com.