All-Weather Portfolio Alert (VTI)
For those who are new and wish to enter a trade, all of the details are listed in the alert (as always) for those wanting to initiate a position. As always, if you have any questions, please do not hesitate to email me at andy@cabotwealth.com.
Our VTI position continues to perform well, up over 48%. With two days left until the March 15 expiration cycle, I’m going to buy back our short calls in VTI and sell calls in April. This will extend our deltas and allow us to take advantage of any continued upside in the ETF.
Vanguard Total Stock Market ETF (VTI)
VTI is currently trading for 256.44.
In the All-Weather portfolio, we currently own the VTI January 17, 2025, 165 call LEAPS contract at $55.05. 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 0.80: the January 16, 2026, 225 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 VTI before placing the trade, otherwise you will be naked short calls):
Once you have LEAPS in your possession:
Buy to close VTI March 15, 2024, 255 call for roughly $2.10. (Adjust accordingly, prices may vary from time of alert.)
Once that occurs:
Sell to open VTI April 19, 2024, 260 call for roughly $2.40. (Adjust accordingly, prices may vary from time of alert.)
Premium received: 4.4%
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 $55.05 (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 VTI.
Yale Endowment Portfolio (EEM, TIP)
iShares MSCI Emerging Market ETF (EEM)
EEM is currently trading for 41.29.
In the Yale Endowment portfolio, we currently own the EEM January 17, 2025, 29 call LEAPS contract at $12.15. 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 16, 2026, 32 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 EEM before placing the trade, otherwise you will be naked short calls):
Once you have LEAPS in your possession:
Buy to close EEM March 15, 2024, 40.5 call for roughly $0.85. (Adjust accordingly, prices may vary from time of alert.)
Once that occurs:
Sell to open EEM April 19, 2024, 42 call for roughly $0.50. (Adjust accordingly, prices may vary from time of alert.)
Premium received: 4.1%
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 $12.15 (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 EEM.
iShares Trust TIPS ETF (TIP)
TIP is currently trading for 107.04.
In the Yale Endowment portfolio, we currently own the TIP January 17, 2025, 95 call LEAPS contract at $16.50. 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 16, 2026, 102 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 TIP before placing the trade, otherwise you will be naked short calls):
Once you have LEAPS in your possession:
Buy to close TIP March 15, 2024, 107 call for roughly $0.27. (Adjust accordingly, prices may vary from time of alert.)
Once that occurs:
Sell to open TIP April 19, 2024, 108 call for roughly $0.46 or more. (Adjust accordingly, prices may vary from time of alert.)
Premium received: 2.8%
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 $16.50 (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 TIP.
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