Poor Man's Covered Call

A poor man's covered call (PMCC) is a capital-efficient alternative to the traditional covered call strategy. Instead of buying 100 shares of stock, the trader purchases a deep in-the-money LEAPS call option (typically with a delta of 0.80 or higher and at least 6-12 months to expiration) and sells shorter-term out-of-the-money calls against it. This mimics the risk/reward profile of a covered call at a fraction of the capital. For example, replacing $18,000 in stock with a $6,000 LEAPS option. The key risk is that the LEAPS call can lose significant value if the stock drops substantially, and the short call's strike should ideally be above the LEAPS' cost basis (strike plus premium paid) to avoid scenarios where maximum loss exceeds the net debit. The strategy benefits from time decay on the short call while the long LEAPS retains most of its value.