The Poor Man’s Covered Call (PMCC) Strategy: A Real-Life Example
The Poor Man’s Covered Call (PMCC) is a covered call writing-like strategy where deep in-the-money LEAPS options (1–2-year expirations) are purchased and short-term out-of-the-calls are sold against the long calls. It is a low-cost way to enter a covered call trade, but it is so much more than simply “covered call writing, but cheaper”.
Technical term
- Long call diagonal debit spread
- Simultaneous purchase and sale of an equal number of call contracts on the same stock but with different strikes and expiration dates
- Goal is to generate income as we reduce the cost-basis
Pros & Cons of the PMCC
***Screenshot from the book, Covered Call Writing Alternative Strategies.
Real-Life Example: Intel Corp. (NASDAQ: INTC): $43.34 on 3/9/2026:
Buy the $37.00 1/21/2028 LEAPS at $17.85
INTC: Short Call Selection
STO 4/10/2026 $55.00 call at $0.58
INTC Calculations with the BCI PMCC Calculator
- The red bold “YES” means that, if the trade is closed early due to significant share price appreciation, it will be closed at a profit
- The initial 32-day return is 3.25%, 65.32% annualized
- The upside potential is 68.57%
- The max annualized return is 782.14%
- The breakeven price is $54.27
- The max loss is $17.27
Discussion
- The PMCC is a covered call writing-like strategy with pros and cons
- Must master all the “moving parts” and then decide if this is an appropriate strategy for our goals and personal risk-tolerances
- Like traditional covered call writing, mastering the 3-required skills (stock selection, option selection & position management) is essential to generate the highest long-term returns
Author: Alan Ellman