Cabot Options Institute Fundamentals – Buffett Patient Portfolio Alert (AAPL)
Apple (AAPL)
We currently own the AAPL January 17, 2025, 135 call LEAPS contract at $48.00. 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 0.80: the January 17, 2025, 150 calls. We typically initiate a LEAPS position, with a delta of roughly 0.80, that has about 18 to 24 months left until expiration.
Here is the trade (you must own LEAPS in AAPL before placing the trade, otherwise you will be naked short calls):
Apple (AAPL)
AAPL is currently trading at 179.86.
Here is the trade:
Buy to close AAPL June 16, 2023, 175 call for roughly $6.80 or more (adjust accordingly, prices may vary from time of alert)
Once that occurs:
Sell to open AAPL July 21, 2023, 185 call for roughly $3.65 or more (adjust accordingly, prices may vary from time of alert)
Premium received: 7.6%
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 $48.00 (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 AAPL.
As always, if you have any questions, please feel free to email me at andy@cabotwealth.com.