Then sell monthly calls against it — same income, 90% less capital!
Save $17,500 in Capital
Use that savings to run 7 more strategies simultaneously
Live Example: AAPL PMCC
Start: AAPL = $200/share
Step 1: Buy the LEAPS
Buy Jan 2026 $180 call (420 DTE)
Delta: 0.85 | Cost: $25/share
−$2,500 cost
Step 2: Sell Short Call
Sell Feb $210 call (30 DTE)
Delta: 0.30 | Premium: $3/share
+$300 income
AAPL closes $208
Best Case
Short call expires worthless
Keep $300 + sell again next month
AAPL closes $215
Max Profit
Short call ITM by $5
Total profit = $1,100
AAPL drops to $175
Losing Case
Both calls lose value
Long LEAPS still has time value
Breakeven, Max Profit & Risk
Max Profit
$1,100
(Short strike − Long strike) × 100 − Net debit (210 − 180) × 100 − $2,200 = $1,100
Breakeven
$202
Long strike + Net debit $180 + $22 = $202
Max Loss
$2,200
Net debit paid (if stock crashes to $0)
PMCC vs Traditional Covered Call
Feature
Traditional
Poor Man's
Capital Required
$20,000
$2,500
Monthly Premium
$300–$500
$300–$500
Max Loss
$20,000
$2,500
Dividends?
✅ Yes
❌ No
Theta Decay Risk
None (own shares)
Long LEAPS loses value over time
Golden Rules
Long LEAPS: 12+ months out, 0.80–0.90 Delta (deep ITM)
Short call: 30–45 DTE, 0.30 Delta (OTM)
Spread width: $20+ between strikes for profit room
Only use on stocks you'd hold long-term
Roll short call if challenged (don't let it get assigned)
Watch for early assignment risk around ex-dividend dates
Exit if LEAPS drops below 60 DTE (Theta accelerates)
Quick Quiz – Poor Man's Covered Call
1. What is a Poor Man's Covered Call?
2. AAPL is $200. You buy a $180 call for $25 and sell a $210 call for $3. What is your max profit?
3. What makes it "diagonal"?
4. What Delta should your long call have?
5. Stock tanks 20%. What happens?
Correct Answers
You buy a long-dated ITM call + sell a short-dated OTM call
$1,100 ((210 − 180) × 100 − $2,200 net cost)
Long call expires 60+ days after short call
0.80–0.90
Both lose value — short expires worthless, long bleeds Theta
Apply This on Treeova
Spin up a PMCC agent in minutes. Describe the trade in plain English, attach a paper or live broker account, and let Treeova monitor the LEAPS, roll the short call, and alert you when the spread profit hits your target.
A PMCC replaces owning 100 shares with a deep ITM LEAPS call (long-dated option with 0.70+ delta). You then sell short-term OTM calls against it, similar to a covered call but with much less capital. It's a diagonal spread that simulates covered call income.
How much capital does a PMCC save compared to a covered call?
A PMCC typically costs 40-60% less than owning shares outright. For a $200 stock, buying shares costs $20,000 per lot, while a deep ITM LEAPS might cost $8,000-$12,000 — still getting similar covered call income from the short calls.
What are the risks of a Poor Man's Covered Call?
The LEAPS has an expiration date (unlike shares), so total loss is possible if the stock drops significantly. The short call can be assigned, forcing you to sell the LEAPS at a potential loss. Also, the LEAPS loses extrinsic value over time.
How do I set up a PMCC on Treeova?
Describe it to the prompt-based strategy builder: 'Set up a PMCC on MSFT. Buy a 0.75 delta LEAPS call 12+ months out, then sell monthly 0.25 delta calls against it. Alert me if the short call reaches 0.40 delta or if the spread profit hits 50%.' The AI handles multi-leg monitoring.
How risky is a Poor Man's Covered Call?
A PMCC is moderate-risk. Maximum loss is capped at the net debit you paid (typically $2,000–$3,000 per spread vs. $20,000+ for shares), but the LEAPS expires — unlike stock — so a sustained drop below your long strike can wipe out the position. Theta decay on the LEAPS also accelerates inside 60 DTE, so most traders roll or exit before then. Early assignment on the short call around ex-dividend dates is the other watchout.
Is a Poor Man's Covered Call bullish or bearish?
A PMCC is moderately bullish to neutral. The deep ITM LEAPS gives you upside exposure (≈0.80 delta, behaving much like long stock), while the short OTM call you sell against it caps gains above the short strike and adds a small bearish hedge. You profit most when the stock drifts up slowly toward — but not far past — your short strike.
Apply This on Treeova
The PMCC lets you run a covered call strategy with less capital. Here's how to set it up on Treeova.
1
Select the LEAPS
Find a deep ITM call option with at least 12 months to expiration and 0.70+ delta on your target stock.
2
Sell Short-Term Calls
Sell OTM calls (0.20-0.30 delta) with 30-45 DTE against your LEAPS position.
3
Monitor the Spread
Use the prompt-based strategy builder to track the delta relationship and roll timing.
💡 Example Prompt
"Set up a PMCC on MSFT. Buy a 0.75 delta LEAPS call 12+ months out, then sell monthly 0.25 delta calls against it. Alert me if the short call reaches 0.40 delta or if the spread profit hits 50%."
more options strategiesOptions Strategiespoor-mans-covered-callPoor Man's Covered Call (PMCC):Covered Call Income with 90% Less CapitalGet the benefits of covered calls without tying up $20,000+ in shares.Use LEAPS to replicate stock ownership for 70–90% less capital.What Is a Poor Man's Covered Call?Traditional Covered CallBuy 100 shares at $200 = $20,000 tied upThen sell monthly calls to collect premiumPoor Man's VersionBuy 1 LEAPS call (12+ months, 0.80 Delta) = $2,500Then sell monthly calls against it — same income, 90% less capital!Save $17,500 in CapitalUse that savings to run 7 more strategies simultaneouslyLive Example: AAPL PMCCStart: AAPL = $200/shareStep 1: Buy the LEAPSBuy Jan 2026 $180 call (420 DTE)Delta: 0.85 | Cost: $25/share−$2,500 costStep 2: Sell Short CallSell Feb $210 call (30 DTE)Delta: 0.30 | Premium: $3/share+$300 incomeAAPL closes $208Best CaseShort call expires worthlessKeep $300 + sell again next monthAAPL closes $215Max ProfitShort call ITM by $5Total profit = $1,100AAPL drops to $175Losing CaseBoth calls lose valueLong LEAPS still has time valueBreakeven, Max Profit & RiskMax Profit$1,100(Short strike − Long strike) × 100 − Net debit(210 − 180) × 100 − $2,200 = $1,100Breakeven$202Long strike + Net debit$180 + $22 = $202Max Loss$2,200Net debit paid (if stock crashes to $0)PMCC vs Traditional Covered CallFeatureTraditionalPoor Man'sCapital Required$20,000$2,500Monthly Premium$300–$500$300–$500Max Loss$20,000$2,500Dividends?✅ Yes❌ NoTheta Decay RiskNone (own shares)Long LEAPS loses value over timeGolden RulesLong LEAPS: 12+ months out, 0.80–0.90 Delta (deep ITM)Short call: 30–45 DTE, 0.30 Delta (OTM)Spread width: $20+ between strikes for profit roomOnly use on stocks you'd hold long-termRoll short call if challenged (don't let it get assigned)Watch for early assignment risk around ex-dividend datesExit if LEAPS drops below 60 DTE (Theta accelerates)Quick Quiz – Poor Man's Covered Call1. What is a Poor Man's Covered Call?You buy a long-dated ITM call + sell a short-dated OTM callYou buy 100 shares cheap and sell callsYou sell naked calls with no hedgeYou use margin to buy shares2. AAPL is $200. You buy a $180 call for $25 and sell a $210 call for $3. What is your max profit?$300$800$1,100Unlimited3. What makes it "diagonal"?Both options have the same expirationLong call expires 60+ days after short callYou trade on diagonal market movesIt uses margin4. What Delta should your long call have?0.30–0.400.50–0.600.70–0.800.80–0.905. Stock tanks 20%. What happens?You're protected — no lossBoth lose value — short expires worthless, long bleeds ThetaYou make money from the spreadOnly the short call loses valueCheck AnswersCorrect AnswersYou buy a long-dated ITM call + sell a short-dated OTM call$1,100 ((210 − 180) × 100 − $2,200 net cost)Long call expires 60+ days after short call0.80–0.90Both lose value — short expires worthless, long bleeds ThetaApply This on TreeovaSpin up a PMCC agent in minutes. Describe the trade in plain English, attach a paper or live broker account, and let Treeova monitor the LEAPS, roll the short call, and alert you when the spread profit hits your target.Paper trade a PMCC freeConnect a live brokerNext → Understanding DeltaPoor Man's Covered Call FAQWhat is a Poor Man's Covered Call (PMCC)?A PMCC replaces owning 100 shares with a deep ITM LEAPS call (long-dated option with 0.70+ delta). You then sell short-term OTM calls against it, similar to a covered call but with much less capital. It's a diagonal spread that simulates covered call income.How much capital does a PMCC save compared to a covered call?A PMCC typically costs 40-60% less than owning shares outright. For a $200 stock, buying shares costs $20,000 per lot, while a deep ITM LEAPS might cost $8,000-$12,000 — still getting similar covered call income from the short calls.What are the risks of a Poor Man's Covered Call?The LEAPS has an expiration date (unlike shares), so total loss is possible if the stock drops significantly. The short call can be assigned, forcing you to sell the LEAPS at a potential loss. Also, the LEAPS loses extrinsic value over time.How do I set up a PMCC on Treeova?Describe it to the prompt-based strategy builder: 'Set up a PMCC on MSFT. Buy a 0.75 delta LEAPS call 12+ months out, then sell monthly 0.25 delta calls against it. Alert me if the short call reaches 0.40 delta or if the spread profit hits 50%.' The AI handles multi-leg monitoring.How risky is a Poor Man's Covered Call?A PMCC is moderate-risk. Maximum loss is capped at the net debit you paid (typically $2,000–$3,000 per spread vs. $20,000+ for shares), but the LEAPS expires — unlike stock — so a sustained drop below your long strike can wipe out the position. Theta decay on the LEAPS also accelerates inside 60 DTE, so most traders roll or exit before then. Early assignment on the short call around ex-dividend dates is the other watchout.Is a Poor Man's Covered Call bullish or bearish?A PMCC is moderately bullish to neutral. The deep ITM LEAPS gives you upside exposure (≈0.80 delta, behaving much like long stock), while the short OTM call you sell against it caps gains above the short strike and adds a small bearish hedge. You profit most when the stock drifts up slowly toward — but not far past — your short strike.Apply This on TreeovaThe PMCC lets you run a covered call strategy with less capital. Here's how to set it up on Treeova.1Select the LEAPSFind a deep ITM call option with at least 12 months to expiration and 0.70+ delta on your target stock.2Sell Short-Term CallsSell OTM calls (0.20-0.30 delta) with 30-45 DTE against your LEAPS position.3Monitor the SpreadUse the prompt-based strategy builder to track the delta relationship and roll timing.💡 Example PromptCopy"Set up a PMCC on MSFT. Buy a 0.75 delta LEAPS call 12+ months out, then sell monthly 0.25 delta calls against it. Alert me if the short call reaches 0.40 delta or if the spread profit hits 50%."Try it Now →Learn More →Last updated: November 24, 2025Educational content powered by Treeova AI