Cabot Options Institute Fundamentals - All-Weather Portfolio Alert (GLD, DBC)
SPDR Gold Shares ETF (GLD)
GLD is currently trading for 182.96.
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, 176 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 October 20, 2023, 181 call for roughly $2.31. (Adjust accordingly, prices may vary from time of alert.)
Once that occurs (or if you are new to the position):
Sell to open GLD November 17, 2023, 188 call for roughly $1.95. (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 $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.
Invesco DB Commodity Index ETF (DBC)
DBC is currently trading for 25.25.
We currently own the DBC January 17, 2025, 21 call LEAPS contract at $4.80. 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, 22 calls.
We typically initiate a LEAPS position, with a delta of roughly 0.80, that has roughly 18 to 24 months left until expiration.
Also, 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.
Here is the trade (you must own LEAPS in DBC before placing the trade, otherwise you will be naked short calls):
Once you have LEAPS in your possession:
Buy to close DBC October 20, 2023, 25 call for roughly $0.30 or more. (Adjust accordingly, prices may vary from time of alert.)
Once that occurs (or if you are new to the position):
Sell to open DBC December 15, 2023, 26 call for roughly $0.50 or more (Adjust accordingly, prices may vary from time of alert.)
Premium received: 10.4%
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 $4.80 (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 DBC.