Cabot Options Institute Fundamentals – Alert (CVX, DBC)
Growth/Value Portfolio
Chevron (CVX)
As a reminder, this trade is for the CVX position in the Growth/Value Portfolio, not the CVX position that resides in our Dogs of the Dow Portfolio. I have a CVX position in both, as both portfolios are looked at as separate entities to keep things mechanical and consistent. However, for most subscribers, it is unnecessary to have double exposure. Just understand that I will be treating each CVX position as two separate entities. I hope this clears up any confusion.
In the Growth/Value Portfolio, we currently own the CVX January 19, 2024, 115 call LEAPS contract at $48.60. Some of you may own a different LEAPS contract depending on when you initiated a position in CVX.
Today I’m going to sell my CVX January 19, 2024 115 call LEAPS contract for $48.30. As a result, we are locking in a small gain of 10.56%. The individual stock was up 1.21% over the same timeframe.
Here is the trade:
Sell to close CVX January 19, 2024, 115 call for roughly $48.30 (adjust accordingly, prices may vary from time of alert)
All-Weather Portfolio
Invesco DB Commodity Index ETF (DBC)
We currently own the DBC January 19, 2024, 22 call LEAPS contract at $10.50. You must own LEAPS in order to use this strategy.
There are 296 days left until our DBC LEAPS are due to expire. Per our guidelines we roll out our LEAPS further in duration once there are 10-12 months left in our LEAPS contract.
As a result, I want to sell to close our DBC January 19, 2024, 22 call LEAPS contract and immediately buy to open a January 2025 LEAPS contract with 660 days left until expiration.
Here is the trade:
Sell to close DBC January 19, 2024, 22 call for roughly $3.00 (adjust accordingly, prices may vary from the time of alert)
Once that occurs:
Buy to open DBC January 17, 2025, 21 call for roughly $4.80 or more (adjust accordingly, prices may vary from time of alert)
And once you have LEAPS in your possession:
Sell to open DBC May 19, 2023, 24 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.
As always, if you have any questions, please feel free to email me at andy@cabotwealth.com.