Poor Man's Covered Call

A poor man's covered call (PMCC) replaces the 100 shares of stock a traditional covered call requires with a single long-dated, deep in-the-money LEAPS call (a long-term options contract typically expiring a year or more out), then sells short-dated calls against that long call for income, the same way a traditional covered call sells calls against real shares. The appeal is capital efficiency: the long call typically costs a fraction of what 100 shares would, since it behaves similarly to stock without requiring the full purchase price. The short call's strike must sit above the long call's strike; the gap between them caps the position's maximum possible profit, though the actual maximum profit is that gap minus the net cost paid to open the position (the long call's cost minus the premium collected from the short call). A PMCC carries risks a traditional covered call doesn't: the long call itself can lose value and eventually expires, it doesn't collect dividends, and if the short call is assigned early, the trader has no real shares to deliver and must exercise the long call, giving up whatever time value remains in it.