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Fundamentals
Realistic Strategies, Realistic Returns

October 11, 2023

We have numerous positions to roll prior to the October 20, 2023. I’m going to start today with GOOGL an AMGN. I’ll be sending out several alerts over the coming days. Stay tuned!

Cabot Options Institute Fundamentals – (GOOGL, AMGN)

We have numerous positions to roll prior to the October 20, 2023. I’m going to start today with GOOGL an AMGN. I’ll be sending out several alerts over the coming days. Stay tuned!

Buffett’s Patient Investor Portfolio Alert (GOOGL)

Alphabet (GOOGL)

GOOGL is currently trading for 140.

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 June 20, 2025, 115 calls.

COI_F_101123_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 October 20, 2023, 135 call for roughly $5.80. (Adjust accordingly, prices may vary from time of alert.)

COI_F_101123_GOOGL_close.png

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

Sell to open GOOGL November 24, 2023, 146 call for roughly $3.25. (Adjust accordingly, prices may vary from time of alert.)

COI_F_101123_GOOGL_open.png

Premium received: 9.4%

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.

Portfolio Alert: Dogs of the Dow Portfolio Alert (AMGN)

Amgen (AMGN)

AMGN is currently trading for 283.30.

We currently own the AMGN January 17, 2025, 200 call LEAPS contract at $81.35. 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 17, 2025, 230 calls.

COI_F_101123_AMGN_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:

Buy to close the AMGN October 20, 2023, 275 call for roughly $10.70. (Adjust accordingly, prices may vary from time of alert.)

COI_F_101123_AMGN_close.png

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

Sell to open AMGN November 24, 2023, 295 call for roughly $4.90. (Adjust accordingly, prices may vary from time of alert.)

COI_F_101123_AMGN_open.png

Premium received: 6.0%

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 $81.35 (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 AMGN.

Andy Crowder is a professional options trader, researcher and Senior Analyst at Cabot. 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.