September 6, 2023

I will be sending out numerous alerts over the next few days. With 9 days left until the September 15 expiration cycle, now is the ideal time to begin looking to buy back our short calls and sell more call premium going out to October 13, which has 37 days left until expiration.

Dogs of the Dow Portfolio Alert (CSCO)

Cisco Systems (CSCO)

Our Cisco position is up 66.5% YTD while the underlying stock is only up 20.8%, once again showing the power of using poor man’s covered calls.

CSCO has rallied higher and pushed through our short call strike. As a result, I want to buy back our short calls, immediately sell more call premium and increase our deltas to benefit from any further upside.

We currently own the CSCO January 17, 2025, 35 call LEAPS contract at $15.65. 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, 45 calls.

We typically initiate a LEAPS position, with a delta of roughly 0.80, that has about 18 to 24 months left until expiration.

CSCO is currently trading for 57.14.

Here is the trade:

Buy to close CSCO September 15, 2023, 55 call for roughly $2.33. (Adjust accordingly, prices may vary from time of alert.)

Once that occurs (or if you are new to the position):

Sell to open CSCO October 13, 2023, 58 call for roughly $0.72. (Adjust accordingly, prices may vary from time of alert.)

Premium received: 4.6%

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 $15.65 (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 CSCO.

As always, please do not hesitate to email me with any questions at andy@cabotwealth.com.

Andy Crowder

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.