Cabot Options Institute Fundamentals – Portfolio Alerts (VZ, SPY, TTE, GOOGL)
The bullish momentum continues to benefit all our portfolios. None of this should be a surprise as all of our portfolios are inherently long delta.
Today I want to adjust a few positions and add two brand-new positions to the mix. See details below.
Dogs of the Dow Portfolio - Verizon (VZ)
Verizon is currently trading for 37.07.
In the Dogs of the Dow portfolio, we currently own the VZ January 17, 2025, 30 call LEAPS contract at $10.40. 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 0.78: the January 17, 2025, 30 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 VZ before placing the trade, otherwise you will be naked short calls):
Buy to close VZ July 21, 2023, 36 call for roughly $1.15 (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 VZ August 18, 2023, 38 call for roughly $0.52 (adjust accordingly, prices may vary from time of alert)
Premium received: 5.0%
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 $10.40 (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 VZ.
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.
Yale Endowment Portfolio - SPDR S&P 500 ETF (SPY)
SPY is currently trading for 443.84.
In the Yale Endowment portfolio, we currently own the SPY January 17, 2025, 345 call LEAPS contract at $98.00. 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, 375 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 SPY before placing the trade, otherwise you will be naked short calls):
Once you have LEAPS in your possession:
Buy to close SPY July 21, 2023, 438 call for roughly $8.82 or more (adjust accordingly, prices may vary from time of alert)
Once that occurs:
Sell to open SPY August 18, 2023, 452 call for roughly $4.51 or more (adjust accordingly, prices may vary from time of alert)
Premium received: 4.6%
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 $98.00 (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 SPY.
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.
O’Shaughnessy’s Growth/Value Portfolio - TotalEnergies SE (TTE)
TTE is currently trading for 57.69.
Here is the trade:
Buy to open the TTE January 17, 2025, 50 call for roughly $11.30 (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 TTE August 18, 2023, 60 call for roughly $0.95 (adjust accordingly, prices may vary from time of alert)
Premium received: 8.4%
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 $11.30 (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 TTE. That being said, since TTE resides in one of our active portfolios, there is the potential we take the trade off during our periodic monthly rebalancing which falls around each options expiration cycle.
*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.
Buffett’s Patient Investor Portfolio - Alphabet (GOOGL)
GOOGL is currently trading for 120.37.
Here is the trade:
Buy to open the GOOGL January 17, 2025, 100 call for roughly $34.45 (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 GOOGL August 18, 2023, 130 call for roughly $1.86 (adjust accordingly, prices may vary from time of alert)
Premium received: 5.4%
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 $34.45 (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 GOOGL. That being said, since GOOGL resides in one of our active portfolios, there is the potential we take the trade off during our periodic monthly rebalancing which falls around each options expiration cycle.
*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.