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Fundamentals
Realistic Strategies, Realistic Returns

March 30, 2023

Cabot Options Institute Fundamentals – Dogs of the Dow Portfolio Alert (INTC)

Intel (INTC)

INTC has pushed through our 31 call strike, and the delta of our short call is nearing parity with our current LEAPS contract. As a result, I want to buy back our short calls and sell more calls. Reestablishing our deltas will allow us to continue to participate in any further near-term upside in INTC.

Our INTC position is up 31.1%, while the underlying stock is only up 17.3%.

We currently own the INTC January 17, 2025, 17.5 call LEAPS contract at $11.40. 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 0.79: the January 17, 2025, 25 calls. We typically initiate a LEAPS position, with a delta of roughly 0.80, that has about 18 to 24 months left until expiration.

INTC is currently trading for 32.33.

Here is the trade:

Buy to close the INTC April 28, 2023, 31 call for roughly $2.45 (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 the INTC April 28, 2023, 35 call for roughly $0.70 (adjust accordingly, prices may vary from time of alert)

Premium received: 6.1%

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 $11.40 (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 INTC.

Andy Crowder is a professional options trader, researcher and Chief Analyst of Cabot Options Institute. Formerly with Oppenheimer & Co. in New York, Andy has leveraged his investment experience to develop his statistically based options trading strategy which applies probability theory to option valuations in order to execute risk-controlled trades. This proprietary strategy has been refined through two decades of research and real-world experience and has been featured in the Wall Street Journal, Seeking Alpha, and numerous other financial publications. Andy has helped thousands of option traders learn and implement his meticulous rules-driven options trading strategies through highly attended conferences, one-on-one coaching, webinars, and his work as a financial columnist. He currently resides in Bolton Valley, Vermont and when he’s not trading, teaching and writing about options, he enjoys spending time with his wife and two daughters, backcountry skiing, biking, running and enjoying all things outdoors.