Portfolio Alerts (JPM, CVX, MMM, DOW)
It’s time to buy back the rest of our September 15, 2023 short calls an sell more premium in October. Our Dogs of the Dow portfolio is currently flat on the year while our Small Dogs portfolio is up over 20%.
I plan on buying back a few other short calls and immediately selling more calls over the next few days, but I wanted to take care of our September 15 calls first. Be on the lookout for several more trade alerts this week. It’s expiration week, so, as always, trades are a bit on the heavier side of things.
Dogs of the Dow Portfolio - JPMorgan (JPM)
We currently own the JPM January 17, 2025, 100 call LEAPS contract at $46.20. You must own LEAPS in order to use this strategy.
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.
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, 115 calls.
We typically initiate a LEAPS position, with a delta of roughly 0.80, that has about 18 to 24 months left until expiration.
JPM is currently trading for 146.86.
Here is the trade:
Buy to close JPM September 15, 2023, 165 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 and already own LEAPS):
Sell to open JPM October 20, 2023, 155 call for roughly $0.82. (Adjust accordingly, prices may vary from time of alert.)
Premium received: 1.8%
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 $46.20 (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 JPM.
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 - Chevron (CVX)
We currently own the CVX January 17, 2025, 125 call LEAPS contract at $59.80. You must own LEAPS in order to use this strategy.
That being said, based on our approach, the LEAPS contract that works best is the one with a current delta of 0.80: the January 17, 2025, 130 calls.
We typically initiate a LEAPS position, with a delta of roughly 0.80, that has roughly 18 to 24 months left until expiration.
CVX is currently trading for 166.03.
Here is the trade:
Buy to close CVX September 15, 2023, 170 call for roughly $0.05. (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 CVX October 20, 2023, 175 call for roughly $0.93. (Adjust accordingly, prices may vary from time of alert.)
Premium received: 1.6%
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 $59.80 (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 CVX.
Dogs of the Dow Portfolio - 3M (MMM)
We currently own the MMM January 17, 2025, 90 call LEAPS contract at $41.40. 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, 75 calls.
We typically initiate a LEAPS position, with a delta of roughly 0.80, that has about 18 to 24 months left until expiration.
MMM is currently trading for 102.13.
Here is the trade (you must own LEAPS prior to making the trade below):
Buy to close MMM September 15, 2023, 115 call for roughly $0.02. (Adjust accordingly, prices may vary from time of alert.)
Sell to open MMM October 20, 2023, 105 call for roughly $1.72. (Adjust accordingly, prices may vary from time of alert.)
Premium received: 4.2%
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 $41.40 (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 MMM.
Dogs of the Dow Portfolio - 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 17, 2025, 40 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 DOW before placing the trade, otherwise you will be naked short calls):
DOW is currently trading at 52.88.
Buy to close the DOW September 15, 2023, 57.5 call for roughly $0.02. (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 DOW October 27, 2023, 55 call for roughly $0.85. (Adjust accordingly, prices may vary from time of alert.)
Premium received: 5.0%
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 $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.
As always, please do not hesitate to email me with any questions at andy@cabotwealth.com.