Cabot Options Institute Fundamentals - Alert (TLT, GLP, TIP, TTE)
We have four remaining positions that are due to expire at the November 17, 2023 expiration cycle. So, let’s go ahead and buy our short calls back and immediately sell some more premium.
All-Weather Portfolio (TLT, GLD)
iShares 20+ Year Treasury Bond ETF (TLT)
We allowed our calls to expire worthless last week, thereby reaping the entire call premium. As a result, it’s time to start selling more call premium.
TLT is currently trading for 89.76.
In the All-Weather portfolio, we currently own the TLT January 17, 2025, 85 call LEAPS contract at $24.05. 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, 70 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 TLT before placing the trade, otherwise you will be naked short calls):
Once you have LEAPS in your possession:
Buy to close TLT November 17, 2023, 92 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):
Sell to open TLT December 15, 2023, 92 call for roughly $0.83. (Adjust accordingly, prices may vary from time of alert.)
Premium received: 3.5%
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 $24.05 (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 TLT.
The All-Weather Portfolio continues to shine in all market environments. The strategy might not offer historic upside, but it also doesn’t expose investors to huge downside risk. It’s simply a consistent performer through thick or thin. The goal is obviously to make a nice return but with a smooth equity curve.
SPDR Gold Shares ETF (GLD)
GLD is currently trading for 183.86.
In the All-Weather portfolio, we currently own the GLD January 17, 2025, 171 call LEAPS contract at $32.00. 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 16, 2026, 174 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 GLD before placing the trade, otherwise you will be naked short calls):
Once you have LEAPS in your possession:
Buy to close GLD November 17, 2023, 188 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):
Sell to open GLD December 15, 2023, 188 call for roughly $1.22. (Adjust accordingly, prices may vary from time of alert.)
Premium received: 3.8%
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 $32.00 (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.
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 (TIP)
iShares Trust TIPS ETF (TIP)
TIP is currently trading for 104.34.
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, 70 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 November 17, 105 call for roughly $0.03. (Adjust accordingly, prices may vary from time of alert.)
Once that occurs:
Sell to open TIP January 19, 2024, 107 call for roughly $0.56 or more. (Adjust accordingly, prices may vary from time of alert.)
Premium received: 3.4%
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 $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.
O’Shaughnessy’s Growth-Value Portfolio
O’Shaughnessy’s Growth/Value Portfolio Alert (TTE)
Our position in TTE is up 72.6% since we introduced it back on June 30, 2023. By comparison, the stock is up only 15.2% over the same time frame. With our short calls currently in the money and October 20 expiration only a few days away, I want to buy back our October 20, 65 calls and immediately sell more calls going out to the November expiration cycle.
I’ll be sending out numerous alerts over the next few days as we approach the end of the October 20 expiration cycle.
TotalEnergies SE (TTE)
TTE is currently trading for 67.23.
In the O’Shaughnessy’s Growth/Value portfolio, we currently own the TTE January 17, 2025, 50 call LEAPS contract at $11.30. 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 17, 2025, 52.5 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 TTE before placing the trade, otherwise you will be naked short calls):
Buy to close TTE November 17, 2023, 70 call for roughly $0.03. (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 December 15, 2023, 70 call for roughly $0.55. (Adjust accordingly, prices may vary from time of alert.)
Premium received: 4.9%
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 $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.
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.