Dogs of the Dow Alert (AMGN)
While the S&P 500, Nasdaq 100 and Russell 200 are down on the day, the Dow is up on the day. As a result, our Dogs and Small Dogs portfolios are benefitting greatly, as seven out of the ten positions are up on the day.
We still have a few July positions to roll forward and several underlying stocks that have recently pushed above their short call strikes. So, the plan is to buy back our short calls, where needed, and immediately sell more premium. I’m going to start today with AMGN which is one of the few positions with July 21, 2023, calls.
Amgen (AMGN)
We currently own the AMGN January 17, 2025, 200 call LEAPS contract at $81.35. 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 17, 2025, 185 calls. We typically initiate a LEAPS position, with a delta of roughly 0.80, that has about 18 to 24 months left until expiration.
AMGN is currently trading for 234.26.
Here is the trade:
Buy to close the AMGN July 21, 2023, 230 call for roughly $4.70 (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 August 25, 2023, 245 call for roughly $2.50 (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 $81.35 (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.