Market Movements

^{*Weekly Return is calculated as market open of the previous Wednesday, to market close this Tuesday (yesterday); Current Level is Tuesday’s (yesterday’s) close.}

Weekly Rollout

Markets paused after a strong six-day run, with the S&P 500 slipping as investors weighed a wave of earnings and looked ahead to Wednesday’s Fed meeting. While some hoped for a hint at easing, expectations remain firmly in place for rates to stay where they are. Powell is likely to stick with a cautious tone, reinforcing that inflation remains too persistent for any major policy shift. Meanwhile, the dollar reached a one-month high against the euro, supported by trade optimism and the Fed’s steady stance.

In the options world, covered-call funds continue to attract record inflows as investors look for yield in a sideways market. With some funds offering double-digit payouts, it's clear that premium-selling strategies are in high demand. And while market corrections often spark concern, long-term data suggests that options sellers aren’t necessarily doomed when stocks dip. It’s the speed of the move—not just the size—that poses the real risk. Patience and positioning still matter most.

“Good-To-Know’s”

The strategy begins by buying a LEAP, with usually 12 months or more until expiration, and a delta of around 70 to 90. You then sell a shorter-term out-of-the-money call against it, much like a covered call.

If the short call expires worthless, you keep the premium and can sell another. If it’s exercised, you manage it by either rolling or closing the position. The PMCC is ideal for those who want to benefit from option income and directional exposure without tying up large sums in stock ownership.

For more on PMCCs (aka Diagonal Spreads) and how they compare to Covered Calls, check out this previous edition:

Quote(s) I Like

Thought Throttle

Most investors, at some point or another in their options investigations, have come across a vast and expensive list of structures and strategies available to us option traders. There is no doubt this can be overwhelming.

But what about the basics? Which strategies/structures are widely used and time-tested classics? Which option setups offer the smartest balance of simplicity, effectiveness, and flexibility for long-term investors? In a world of endless complexity, these would be the tools worth mastering first.

So what meets the criteria?

The three strategies most investors (not gamblers) typically start with on their options journey are:

• Cash-Secured Puts (CSPs)

• Covered Calls (CCs)

• Long-Term Equity AnticiPation Securities (LEAPS)

If I were limited to just these for the rest of my life, I’d be perfectly fine with it—and so would my portfolio.

Cash-Secured Puts

A cash-secured put is an options strategy where you sell a put option on a stock you’d be willing to own, while holding enough cash to buy 100 shares at the strike price. You’re paid a premium for taking on the obligation to buy the stock if it drops below the strike. If the option expires worthless, you keep the premium. If assigned, you buy the stock at a discount—effectively getting paid to wait for a better entry point.

These are incredibly versatile tools because they can be structured in a way where either outcome is a win. If the option expires worthless, you keep the premium. Great. If you're assigned and end up purchasing the shares at the strike price, you're buying a stock you wanted at a discount. Great too.

It’s an excellent way to initiate positions, all while earning income for taking on the potential obligation to buy. CSPs are truly a staple. Reliable and consistent, it’s no wonder they’re often one of the first strategies long-term investors add to their toolkit.

We can’t get too deep in this edition, but be sure to check out one of our previous editions for more information on CSPs:

Covered Calls

A covered call is an options strategy where you sell a call option against shares you already hold, typically 100 shares of the stock (this is 1 options contract). In return, you collect a premium for agreeing to sell those shares at a predetermined price (the strike) if the stock rises above that level.

If the stock stays below the strike, the option expires worthless, and you keep both the shares and the premium. If it climbs above the strike, your shares are sold at that price, locking in capital gains (ideally) plus the premium. It’s a powerful way to earn extra yield on positions you already believe in.

Covered calls, like cash-secured puts, can be set up in an ideal manner where you’re largely indifferent to the outcome. In one case, the option expires worthless and you keep all the additional premium. Great. It’s like creating your own dividend. On the other hand, if the option is assigned, you’re happy to sell your shares at the strike price, ideally locking in gains and moving on to the next setup.

Covered calls are often the most widely used strategy among long-term investors. And for good reason. They’re simple, repeatable, and add consistent income on top of positions you already own.

Of course, it’s not without trade-offs. You do cap your upside. If the stock takes off well above your strike, you’ll miss out on those gains. But that’s the nature of this strategy—steady income over explosive upside. For many investors, it’s a trade-off worth making.

Likewise, we can only go so deep into CCs in this edition. For more information, check out this previous newsletter on CCs:

LEAPS

Lastly is LEAPS.

LEAPS are long-dated call options—usually expiring 9 to 36 months out—that allow you to gain exposure to a stock’s upside with significantly less capital than buying the shares outright. Because of their long duration, they lose value to time decay much more slowly than short-term options, making them ideal for longer-term speculation.

Although LEAPS aren’t technically an option-selling strategy, they still benefit from having time on their side. Since they’re so far out, time decay (theta) eats away at their value at a much slower pace, especially early on. This gives investors the ability to participate in potential appreciation without constantly battling the clock.

That said, LEAPS err on the side of speculation. Used incorrectly, like buying far out-of-the-money calls with no plan, many factors can eat away at your position quickly, especially in the final months before expiration. Time decay accelerates sharply in the last 30 days, and newer traders often underestimate just how quickly value can disappear (Illustrated below).

The devil is in the details. On one extreme, a gambler might buy 0 DTE out-of-the-money calls on volatile, unproven stocks with no plan to manage the trade. Bad news.

How can we get as far as possible from this form of gambling? By using LEAPS with 9+ months to expiration, deep in the money (around a 70 to 90 delta), on companies with strong fundamentals—and, most importantly, a plan for what to do when things go right and when they don’t.

When approached with care, LEAPS can offer stock-like exposure at a fraction of the cost, with risks that are still present but lessened compared to short-term “speculation.”

Compare These 3 Setups:

In Summary…

In a world full of exotic spreads, jargon-heavy trades, and strategies with more legs than a centipede, the fundamentals and basics often get overlooked. But as we’ve seen, cash-secured puts, covered calls, and LEAPS offer a smart balance of income, risk control, and capital efficiency.

They’re not just entry-level, they’re enduring classics. These are structures that work just as well for seasoned investors as they do for beginners, and each serves a distinct purpose. CSPs help you enter positions on your terms, covered calls generate income from what you already own, and LEAPS let you access levered upside with less capital at stake.

No single setup is perfect, and all come with trade-offs. But when used thoughtfully—with an understanding of your goals, timeline, and risk tolerance—these three can form the backbone of a flexible, resilient options approach.

Master them and look on your portfolio in amazement.

Trade Mechanics

In this example, we’ll compare two ways to get long exposure to Apple (AAPL): (1) purchasing 100 shares outright versus (2) buying a LEAP. Both approaches aim to profit from potential upside, but they differ significantly in capital requirements, risk, and return.

Currently, Apple is trading at $211.97. Assume that we believe that it will rise to $260 by early summer 2026. The LEAP selected is the Sept 18, 2026 $185 call (~0.75 Delta) with a mid-premium of $44.50, compared to buying 100 shares of stock at $211.97 ($21,197).

Let’s break down the setup:

The share purchase is simple: $21,197 gets you 100 shares, full dividend rights, and no expiration risk. If AAPL hits $260, that’s a solid 22.66% return—not flashy, but stable and dividend-eligible.

The LEAP, on the other hand, costs a fraction of the capital ($4,450), but comes with the tradeoff of time decay and no dividend income. If AAPL hits $260 at expiration, your option would be worth roughly $75 of intrinsic value, turning into a 68.5% return—over 3x the efficiency.

Of course, if AAPL goes sideways or declines, the LEAP bleeds value, sometimes more quickly than the underlying stock. On the other hand, this 68.5% is also at the time of the LEAPS expiration.

If AAPL were to hit $260 early summer ‘26, then this options calculator estimates that our LEAP would be worth $7,810, which is a gain of $3,360 (75.5%). In an extreme scenario, if Apple were to hit $260 by the end of the week (crazy, I know), the LEAP would be worth ~$8,685 (95.2% gain).

The difference in breakevens also needs to be considered. The LEAP holder needs AAPL to climb above $229.50 to profit, while the stockholder breaks even at the current price. But for those who want exposure with less capital tied up, and can manage the risks, the LEAP is a compelling play.

Quick Note To Consider…

Stockholders receive dividends; LEAP holders do not. LEAPs are also subject to Theta decay, Vega exposure, and all of the other risks associated with the greeks. The option value at target price ($260) is an estimate of intrinsic value, not a guaranteed resale price. Market spreads, volatility, and time remaining will all affect outcomes. Always size positions appropriately, and know your tools before using leverage.

This is for educational purposes only—not a trade recommendation. Remember to always do your own due diligence and consult a financial advisor before making investment decisions.

Throttle Q&A

Why do LEAPs have higher premiums than shorter-term calls?

LEAPs cost more because they contain significantly more time value. With more time until expiration, there’s more uncertainty and more opportunity for the stock to move, which makes the option more valuable. That’s why LEAPs decay more slowly than short-term options, but also why they’re more expensive upfront. You’re essentially paying a premium for time and potential.

Which options strategy is best for generating income?

If your goal is steady income, covered calls and cash-secured puts are the most direct paths. Covered calls generate income from shares you already own, while cash-secured puts let you earn premium while waiting to buy stock at a discount.

LEAPs are more speculative, since they don’t generate income on their own, but instead offer capital-efficient upside. If you want income first, CSPs and covered calls should be your go-to.

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Disclaimer

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