Building a Small Dogs PMCC Portfolio (And Why It's Not Just "Dogs of the Dow With Options")

Most people think diversification means owning more stuff.

So they build a "portfolio" that looks like a grocery list, twelve tickers, three sectors, a couple of ETFs, and feel pretty good about spreading risk. Then the next ugly week arrives, and they discover the uncomfortable truth: a lot of "different" positions are still the same bet dressed up in different tickers.

The Small Dogs portfolio is my antidote to that kind of fake complexity.

It's simple on purpose. It's rules-based. And when you pair it with Poor Man's Covered Calls, it becomes something most investors never actually build: a repeatable income engine that can compound without needing hero trades.

Today I want to walk you through how I construct the Small Dogs sleeve inside Wealth Without Shares, why this framework holds up under pressure, and how to execute it cleanly using a consistent PMCC template. We'll use Procter & Gamble as the detailed example, Trade #4 in the 2026 rotation, and I'll show you what last year's results actually looked like, not in theory, but in the ledger.

The Small Dogs Idea (The Version That Actually Matters)

The "Dogs of the Dow" concept is old, simple, and surprisingly durable. You start with the ten highest-yielding Dow stocks at year-end. From that list, you choose the five lowest-priced names. Those five become your "Small Dogs" for the year.

That last step matters more than most people realize. The "lowest-priced" filter tends to push you toward names the market isn't currently treating like royalty. Not broken businesses necessarily, these are still Dow components, after all, but often out-of-favor ones. Unloved. Overlooked. The kind the crowd rotated away from while chasing whatever momentum story dominated the previous quarter.

And out-of-favor is exactly where options traders can get paid.

Because when expectations are low, you don't need perfection. You need "not terrible." You need time. And you need a structure that lets time do what time does.

Here are your official 2026 Small Dogs: VZ, MRK, PG, KO, and NKE.

Why PMCCs Fit the Small Dogs Portfolio So Well

A PMCC isn't "just a covered call with LEAPS."

That description is technically accurate and strategically useless. It's like describing a restaurant as "a building where food is served." True, but it misses everything that makes a great restaurant different from a bad one.

The strategic point is this: a PMCC gives you a two-layer position that behaves like a small business. The core exposure, deep ITM LEAPS that behave stock-like, represents your invested capital. The income overlay, short calls sold against that LEAPS, generates what amounts to operating revenue. You're not trying to nail the perfect entry or predict where the stock lands next month. You're building a structure that can pay you repeatedly while you hold quality businesses through normal market weather.

This distinction matters because it changes how you think about the position. Traditional covered calls require $15,000 to $20,000 per round lot to establish meaningful exposure in blue-chip names. PMCCs let you control similar economic exposure for a fraction of that capital, typically 15% to 35% of the share-equivalent cost, which means you can build a diversified sleeve without tying up your entire account in three positions.

But there's one rule in this entire sleeve that's non-negotiable: always buy the LEAPS first. We do not sell naked calls in Wealth Without Shares. The short call comes second, sold only after your LEAPS fills and only against that established position.

What Last Year Looked Like

Here's the uncomfortable truth about "income strategies": plenty of them sound great until you see the actual ledger.

The backtests look beautiful. The marketing copy is compelling. But when you ask for the real numbers, the winners, the losers, the grinders that went sideways for months, things get quieter.

So let me show you exactly what last year's Small Dogs PMCC sleeve produced.

2025 Results (Single Contract Per Position)

The closed PMCC returns by name: KO finished at +18.10%. VZ finished at -8.30%. MRK delivered +76.58%. CSCO came in at +77.40%. And JNJ led the group at +93.49%.

The portfolio totals tell the real story. Total cost of LEAPS across five positions was $9,725. Total realized gains came to $6,370. That's a total return of 65.50% on deployed capital with one contract per position.

Notice what's in that ledger. You had a loser (VZ), a grinder (KO), and three positions that did exactly what PMCCs are built to do when the underlying cooperates: participate like stock ownership while the short call program helps manage basis and behavior over time.

Equal-Size Template (More Balanced Capital Deployment)

The roughly equal position-size portfolio, KO with 2 contracts, VZ with 3 contracts, MRK with 1, CSCO with 2, and JNJ with 1, produced different numbers worth examining. Total cost of LEAPS was $14,775. Total realized gains came to $7,793. That's a total return of 52.74% on deployed capital.

Two takeaways worth remembering here.

First, equal-weighting usually reduces "lottery winners" in your results, but it often improves durability and consistency across a full market cycle. You're trading peak upside for better risk distribution. Whether that tradeoff makes sense depends on your goals and temperament.

Second, and this is the part most options traders miss, you don't need a perfect hit rate. You need a structure that keeps you in the game while time does the heavy lifting. A 60% winner rate with proper sizing beats an 80% winner rate with erratic sizing every time over a meaningful sample.

The Small Dogs PMCC Template

This sleeve only works if the process is boring.

Not boring like "nothing interesting to watch." Boring like "the same disciplined execution, trade after trade, without improvisation when things get uncomfortable." Here's the structure I use across the entire portfolio.

Step One: LEAPS (Core Exposure)

Target guidelines for the long call: expiration roughly 18 to 30 months out, delta roughly 0.75 to 0.85 so you're getting deep ITM exposure that behaves stock-like, and the explicit goal of capturing equity participation without tying up share-equivalent capital. This is the foundation. Without a properly structured LEAPS, nothing else works.

Step Two: Short Call (Income Layer)

Target guidelines for the income position: DTE in the 30 to 60 day range, delta roughly 0.20 to 0.35 depending on your directional lean and premium available, and a profit-taking discipline of closing at 50% to 75% of maximum profit. The goal here isn't "getting called away" or hitting home runs on premium collection. It's consistent basis reduction, trade after trade, letting small wins compound while keeping your LEAPS exposure intact.

Step Three: Track the Numbers That Actually Matter

If you don't track these four metrics, you don't really know what your portfolio is doing.

Net debit tells you your LEAPS cost minus all collected premium, it's your real skin in the game at any moment. Total premium collected (net of buybacks and rolls) shows the cumulative income your short call program has generated. Effective basis over time reveals how that premium collection is changing your break-even on the underlying position. And return on deployed capital measures what you're actually earning on the money you've committed.

This is how you separate a portfolio from activity. Anyone can trade. Running a business means knowing your numbers.

The PG Example

Let me make this concrete with an example in Procter & Gamble, one of the Small Dogs position for 2026.

Step One: LEAPS Purchase (Core)

Buy to open the PG January 21, 2028, 110 Call at approximately $34.25 per share, or $3,425 per contract.

This is the foundation: long duration giving you roughly two years of runway, deep ITM strike providing stock-like delta exposure, and a cost basis that's roughly 25% of what you'd need to buy 100 shares outright. The LEAPS behaves like ownership while freeing up capital for other positions or opportunities.

Step Two: Short Call Sale (Income)

After the LEAPS fills, and only after it fills, you sell to open against that position. In this case, the PG February 20, 2026, 145 Call at approximately $1.50 with 44 days to expiration.

Let's run the premium math. You collected $1.50 against a LEAPS that cost $34.25. That's roughly 4.4% yield on LEAPS capital over 44 days. Annualized, you're looking at approximately 36% if you could repeat that premium collection cycle consistently throughout the year.

You won't hit that number every cycle, some months the premium is thin, some months you're rolling out of trouble, some months the underlying moves against you. But the structure works because you're not trying to predict where PG will be next Friday. You're setting up a position that can pay you to hold it while letting the long-dated call behave like ownership.

Why Small Dogs Works as a Portfolio Sleeve

This is the part most investors miss entirely.

Small Dogs isn't a "trade idea." It's not a hot tip. It's not even a strategy in isolation. It's a sleeve, a defined allocation within a larger portfolio structure that has a specific job to do.

The job here combines three elements: high-quality, cash-flowing businesses from the Dow 30, a valuation and price filter that steers you toward "not most loved" rather than momentum darlings, and a repeatable options structure that harvests time decay while maintaining equity participation.

When it's working well, it feels boring. Positions grind sideways. You collect premium. You close short calls at 50% profit and sell new ones. The ledger shows steady basis reduction without dramatic swings.

When it's not working, when a position moves against you or an underlying breaks down, it's still manageable, because you're not selling naked risk and you're not betting the portfolio on one name. The defined-risk nature of PMCCs means your worst-case loss is known before you enter. The diversification across five quality names means no single position can sink the sleeve.

This is what systematic income trading actually looks like. Not fireworks. Not prediction. Just structure, discipline, and time.

The Rules That Keep You Out of Trouble

You don't need fancy rules. You need rules you'll actually follow when things get uncomfortable. Here's what I've found works after running this approach through multiple market environments.

Short Call Management

Take profits early. The 50% to 75% target isn't arbitrary, it captures most of your theoretical gain while eliminating the risk of that last week of holding when gamma accelerates and small moves can flip a winner into a loser. Don't let "44 DTE" turn into "2 DTE and panic." If price runs toward your short strike and the position gets tight, roll before it becomes emotional. Roll for time plus distance, not to "win the argument" with the chart. The goal is staying in the trade, not being right about short-term direction.

LEAPS Management

Start planning your LEAPS roll when you have roughly 8 to 12 months remaining to expiration. Below that threshold, theta decay accelerates and the LEAPS stops behaving stock-like in ways that matter for the PMCC structure. Your delta starts slipping. Your time value erodes faster. The leverage characteristics shift. Proactive rolling is almost always cheaper, in both dollars and stress, than emergency rolling when you've let things drift too long.

A Simple Build Checklist

Here's the framework in checklist form, something you can reference each time you add or manage a Small Dogs position.

Confirm the Small Dogs list using the rules-based methodology, ten highest-yielding Dow names, then filter to the five lowest-priced. No opinions. No "but I like this one better." Just the rules.

Use the same PMCC structure across the entire sleeve. Consistency compounds.

Buy LEAPS first, targeting 0.75 to 0.85 delta with 18 to 30 months until expiration.

Sell short calls only after LEAPS fills, targeting 30 to 60 DTE with 0.20 to 0.35 delta.

Take profits at 50% to 75% of maximum. Don't worship the last dime.

Track net debit plus total premium, your real basis, always.

Roll short calls early when challenged. Avoid expiration-week chaos.

Plan LEAPS rolls proactively with 8 to 12 months remaining.

Final Thoughts

Small Dogs works because it forces discipline where most investors improvise.

You're not guessing which Dow component will outperform. You're not chasing. You're not constantly "upgrading" the strategy every time the market changes its mood or some talking head on television makes a compelling case for something different.

You're building a sleeve designed to hold quality businesses, collect premium systematically, and let time do what time does.

Last year's results make the point clearly: even with a loser in the mix (VZ at -8.30%), even with a grinder that barely moved the needle (KO at +18.10%), the structure still delivered strong portfolio-level outcomes. That's not because every trade was perfect. It's because the framework kept you in the game long enough for the winners to carry the losers, which is exactly what systematic income trading is supposed to do.

Next up, we'll continue building and managing this sleeve the same way: one clean position at a time, one premium cycle at a time, one basis-reduction ledger that stays honest about what's working and what isn't.

Probabilities over predictions,

Andy

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Disclaimer: This is educational content only. Not investment advice. Options involve risk and aren't suitable for all investors. Examples are illustrative. Real results will vary. Talk to professionals before you risk real money.