A poor man’s covered call (PMCC) reproduces the payoff of a covered call while tying up far less capital. Instead of buying 100 shares, you buy one deep in-the-money long-dated call (a LEAPS) as a stock substitute and sell shorter-dated calls against it for income.
Open the calculator →Buy a long-dated call (often 6–24 months out) that is deep in the money, so its delta is high — typically 0.80 or more. A high delta means the LEAPS moves almost dollar-for-dollar with the stock, acting like a cheaper substitute for the shares.
Each cycle, sell a near-term out-of-the-money call against it, exactly like a covered call. You collect premium that reduces the cost of holding the long LEAPS.
Capital efficiency is the main advantage: a LEAPS might cost a quarter of what 100 shares cost, so your return on capital can be much higher.
The trade-offs: the LEAPS itself decays over time, you receive no dividends, and you must manage the diagonal so the short strike stays above your long strike to avoid a losing roll.
Keep the short call strike above the LEAPS strike so the spread can never invert into a guaranteed loss. Roll the short call out (and up) as it nears expiration or gets tested.
Watch implied volatility: a drop in IV hurts your long LEAPS more than your short call, so PMCCs are best opened when volatility is reasonable rather than elevated.
Most traders choose 0.80–0.90 delta so the long call tracks the stock closely and has limited extrinsic value to decay.
Your max loss is the net debit of the spread, which is smaller in dollars than owning shares — but as a percentage of capital the risk is higher because of leverage.
Commonly when it is near expiration, deep in profit, or threatened by a rally that pushes the stock toward your short strike.
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