Cabot Options Institute Fundamentals – Yale Endowment Portfolio Alert (TIP)
We need to roll our short calls in TIP prior to expiration. However, I intend on allowing our DBC short calls to expire worthless and sell more premium at the onset of next week.
I will also be buying back more short calls early next week in several of our other portfolios and immediately selling more premium.
iShares TIPS Bond ETF (TIP)
We currently own the TIP January 19, 2024, 100 call LEAPS contract at $17.10. You must own LEAPS in order to use this strategy.
*If you are new to the position, based on our approach, the LEAPS contracts with a delta of 0.81 are currently the January 17, 2025, 98 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:
Buy to close TIP March 17, 2023, 108 call for roughly $0.98 (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 TIP April 21, 2023, 111 call for roughly $0.66 (adjust accordingly, prices may vary from time of alert).
Premium received: 3.9%
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 $17.10 (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.
Cabot Options Institute Fundamentals – All-Weather Portfolio Alert (IEF)
iShares 7-10 Year Treasury Bond ETF (IEF)
We currently own the IEF January 19, 2024, 85 call LEAPS contract at $19.00. You must own LEAPS in order to use this strategy.
*Based on our approach, the LEAPS contracts with a delta of 0.78 are currently the January 17, 2025, 90 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:
Buy to close IEF April 21, 2023, 97 call for roughly $3.20 (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 IEF April 21, 2023, 102 call for roughly $0.68 (adjust accordingly, prices may vary from time of alert)
Premium received: 3.6%
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 $19.00 (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 IEF.
SPDR Gold Trust ETF (GLD)
GLD continues to rally. So much so, that we have pushed through the 183 call strike that we sold just two days ago. I want to keep my deltas at reasonable levels just in case we see a continuation of the current trend.
As always, if you have any questions, please feel free to email me at andy@cabotweath.com.
We currently own the GLD January 19, 2024, 145 call LEAPS contract at $37.00. You must own LEAPS in order to use this strategy.
*Based on our approach, the LEAPS contract that works best is the one with a current delta of 0.80: the January 17, 2025, 171 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:
Buy to close GLD April 21, 2023, 183 call for roughly $5.90 or less (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 GLD April 21, 2023, 193 call for roughly $2.45 or more (adjust accordingly, prices may vary from time of alert)
Premium received: 6.6%
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 $37.00 (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 GLD.
