spreadsMedium RiskNeutral / Bullish
Poor Man's Covered Call
A LEAPS call acts as a stock substitute while you sell short-term calls against it.
What is a Poor Man's Covered Call?
You buy a deep in-the-money LEAPS call (long-dated, 6–24 months) as a cheap alternative to owning 100 shares, then sell short-term OTM calls against it — just like a covered call but without the full capital outlay. The LEAPS acts as your "stock position."
When to use it
Use when you want to run covered call income but don't want to buy 100 shares. Works on expensive stocks where share ownership is capital-intensive. A diagonal spread by another name.
Structure
Buy 1 deep ITM LEAPS call (delta ~0.8+) + sell 1 near-term OTM call each month.
Key Metrics
Max Profit
Monthly income from sold calls minus LEAPS cost over time.
Max Loss
Net debit paid for LEAPS minus any credits received from short calls.
Breakeven
LEAPS strike + net debit paid.
Greeks Profile
Net delta: high positive. Theta: net positive if short call income > LEAPS decay. Vega: net positive.
Tips & Best Practices
- 1Buy LEAPS with delta > 0.80 to get good stock-like exposure.
- 2Sell calls 30–45 DTE, OTM enough to allow stock movement.
- 3Roll the short call out/up when the stock rises to capture more credit.
- 4If stock falls sharply, stop selling calls to let LEAPS recover.
See it in action
Model a Poor Man's Covered Call with a real ticker. See the P&L chart, heatmap, and exact breakevens.
Open Poor Man's Covered Call Calculator →