Cabot Options Institute Fundamentals – Dogs of the Dow Portfolio Alert (INTC, CVX)
Intel (INTC)
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 0.82: the January 17, 2025, 17.5 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:
Buy to close the INTC March 31, 2023, 30 call for roughly $0.02 (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 INTC April 14, 2023, 27 call for roughly $0.57 (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 $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.
Chevron (CVX)
To eliminate any confusion, this CVX trade is for the Dogs of the Dow portfolio, NOT the Growth/Value Portfolio. We opened up a position in CVX months ago and continue to hold that position within that portfolio. As a reminder, each portfolio is run as its own entity.
We currently own the CVX January 17, 2025, 125 call LEAPS contract at $59.80. The 125 LEAPS are now trading for roughly $67.80. You must own LEAPS in order to use this strategy.
If you wish to enter the position and are uncertain about which LEAPS to purchase, please refer to the reports section of your subscriber page or our latest subscriber-exclusive webinar in which I go through the process, step by step, of entering a new position of an already established position.
That being said, based on our approach, the LEAPS contract that works best is the one with a current delta of 0.79: the January 17, 2025, 120 calls. We typically initiate a LEAPS position, with a delta of roughly 0.80, that has roughly 18 to 24 months left until expiration.
CVX is currently trading for 161.96.
Here is the trade:
Buy to close CVX March 17, 2023, 195 call for roughly $0.01 (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 CVX April 21, 2023, 170 call for roughly $2.58 (adjust accordingly, prices may vary from time of alert)
Premium received: 4.3%
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 $59.80 (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 CVX.
And, as always, if you have any questions, please feel free to email me at andy@cabotwealth.com.