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Fundamentals
Realistic Strategies, Realistic Returns

November 22, 2023

We currently own the AAPL January 17, 2025, 135 call LEAPS contract at $48.00. You must own LEAPS in order to use this strategy.

Cabot Options Institute Fundamentals - Alert (APL, GOOGL, IBM, DOW)

Buffett’s Patient Investor Portfolio Alert (AAPL, GOOGL)

Apple (AAPL)

We currently own the AAPL January 17, 2025, 135 call LEAPS contract at $48.00. 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, 165 calls.

COI_F_112223_AAPL_LEAPS.png

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 (you must own LEAPS in AAPL before placing the trade, otherwise you will be naked short calls):

AAPL is currently trading at 192.00.

Here is the trade:

Buy to close AAPL December 1, 2023, 185 call for roughly $7.15 or more. (Adjust accordingly, prices may vary from time of alert.)

COI_F_112223_AAPL_close.png

Once that occurs:

Sell to open AAPL January 19, 2023, 200 call for roughly $2.04. (Adjust accordingly, prices may vary from time of alert.)

COI_F_112223_AAPL_open.png

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 $48.00 (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 AAPL.

Alphabet (GOOGL)

GOOGL is currently trading for 138.33.

In the Buffett’s Patient Investor portfolio, we currently own the GOOGL January 17, 2025, 100 call LEAPS contract at $34.45. 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, 120 calls.

COI_F_112223_GOOGL_LEAPS.png

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 GOOGL before placing the trade, otherwise you will be naked short calls):

Buy to close GOOGL November 24, 2023, 146 call for roughly $0.01. (Adjust accordingly, prices may vary from time of alert.)

COI_F_112223_GOOGL_close.png

Once that occurs (or if you are new to the position and already own LEAPS):

Sell to open GOOGL January 19, 2023, 145 call for roughly $2.19. (Adjust accordingly, prices may vary from time of alert.)

COI_F_112223_GOOGL_open.png

Premium received: 6.4%

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 $34.45 (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 GOOGL.

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.

Dogs of the Dow Portfolio Alert (IBM, DOW)

International Business Machines (IBM)

IBM is currently trading for 154.82.

We currently own the IBM January 17, 2025, 105 call LEAPS contract at $43.15. 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, 120 calls. We typically initiate a LEAPS position, with a delta of roughly 0.80, that has about 18 to 24 months left until expiration.

COI_F_112223_IBM_LEAPS.png

Here is the trade:

Buy to close IBM December 8, 2023, 146 call for roughly $9.20. (Adjust accordingly, prices may vary from time of alert.)

COI_F_112223_IBM_close.png

Once that occurs (and you have LEAPS in your possession):

Sell to open IBM December 29, 2023, 157.5 call for roughly $1.55. (Adjust accordingly, prices may vary from time of alert.)

COI_F_112223_IBM_open.png

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 $43.15 (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 IBM.

Dow Inc. (DOW)

In the Dogs of the Dow Portfolio, we currently own the DOW January 17, 2025, 37.5 call LEAPS contract at $16.85. 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, 37.5 calls.

COI_F_112223_DOW_LEAPS.png

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 DOW before placing the trade, otherwise you will be naked short calls):

DOW is currently trading at 51.50.

Buy to close the DOW December 8, 2023, 50 call for roughly $1.65. (Adjust accordingly, prices may vary from time of alert.)

COI_F_112223_DOW_close.png

Once that occurs (or if you are new to the position and already own LEAPS):

Sell to open DOW December 29, 2023, 53 call for roughly $0.46. (Adjust accordingly, prices may vary from time of alert.)

COI_F_112223_DOW_open.png

Premium received: 2.7%

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 $16.85 (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 DOW.

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.