Cabot Options Institute Fundamentals - Alert (TIP, VNQ, SPY)
Yale Endowment Portfolio Alert (TIP, VNQ, SPY)
iShares Trust TIPS ETF (TIP)
TIP is currently trading for 102.82.
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, 90 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 October 20, 107 call for roughly $0.02. (Adjust accordingly, prices may vary from time of alert.)
Once that occurs:
Sell to open TIP November 17, 2023, 105 call for roughly $0.36 or more. (Adjust accordingly, prices may vary from time of alert.)
Premium received: 2.2%
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.
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.
Vanguard Real Estate ETF (VNQ)
VNQ is currently trading for 73.04.
In the Yale Endowment portfolio, we currently own the VNQ January 17, 2025, 65 call LEAPS contract at $20.70. 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, 55 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 VNQ before placing the trade, otherwise you will be naked short calls):
Once you have LEAPS in your possession:
Buy to close VNQ October 20, 2023, 83 call for roughly $0.01 or more. (Adjust accordingly, prices may vary from time of alert.)
Once that occurs:
Sell to open VNQ November 17, 2023, 76 call for roughly $0.70 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 $20.70 (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 VNQ.
Yale Endowment Portfolio - SPDR S&P 500 ETF (SPY)
SPY is currently trading for 423.90.
In the Yale Endowment portfolio, we currently own the SPY January 17, 2025, 345 call LEAPS contract at $98.00. 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, 355 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 SPY before placing the trade, otherwise you will be naked short calls):
Buy to close SPY October 20, 2023, 453 call for roughly $0.01. (Adjust accordingly, prices may vary from time of alert.)
Sell to open SPY November 17, 2023, 435 call for roughly $3.75. (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 $98.00 (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 SPY.
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.
As always, if you have any questions, please feel free to email me at andy@cabotwealth.com.