A poor man's covered call (PMCC) replaces the 100 shares in a regular covered call with a deep in-the-money LEAPS option, cutting your capital requirement by 60-80%. On a $200 stock, a regular covered call needs $20,000 in shares. A PMCC might need just $5,000-$7,000 for the LEAPS. Both strategies sell short-term calls for income.

How Each Strategy Works

Regular Covered Call:

  • Buy 100 shares of stock → large capital outlay
  • Sell a short-term OTM call → collect premium
  • Repeat monthly

    • Poor Man's Covered Call (PMCC):

  • Buy a deep ITM LEAPS call (70-80 delta, 6-18 months expiration) → smaller capital outlay
  • Sell a short-term OTM call → collect premium
  • Repeat monthly

    • The LEAPS acts as a stock substitute. When the stock moves $1, an 80-delta LEAPS moves about $0.80. You get most of the stock exposure at a fraction of the cost.

    Capital Comparison

    Stock: MSFT at $420

    | Component | Regular CC | PMCC | Long position100 shares = $42,000$350 LEAPS (80Δ, 12-month) = $8,500 Short callSell $435 call (30 DTE) = $6.00Sell $435 call (30 DTE) = $6.00 Total capital$42,000$8,500 Monthly income$600$600 | Yield on capital | 1.43% | 7.06% |

    The PMCC produces the same $600 monthly income on $8,500 of capital versus $42,000. That's a dramatically higher return on capital.

    Where the Regular Covered Call Wins

    1. No time decay on your long position

    You own shares — they don't expire. A LEAPS loses time value every day. Over 12 months, a $8,500 LEAPS might lose $2,000+ in time value if the stock stays flat.

    2. Dividends

    Shareholders receive dividends. LEAPS holders don't. On a stock yielding 2%, that's $840/year in dividends you're missing with the PMCC.

    3. Simplicity

    Shares are straightforward. LEAPS add complexity: you need to manage expiration, roll the LEAPS when it has 3-4 months left, and understand how delta changes affect your position.

    4. No expiration risk

    If the stock drops 30%, your shares are still there. Your LEAPS could lose most of its value, and if you can't roll or close it, you lose the entire $8,500 investment.

    Where the PMCC Wins

    1. Capital efficiency

    With $42,000, you could run one regular covered call on MSFT — or five PMCCs across five different stocks. Diversification dramatically reduces single-name risk.

    2. Defined risk

    Your maximum loss on a PMCC is the LEAPS cost minus premium collected. On a regular covered call, you can lose the full share value minus premiums.

    3. Access to expensive stocks

    Can't afford 100 shares of AMZN at $190 ($19,000)? A LEAPS on AMZN might cost $5,000, making the strategy accessible.

    4. Leverage without margin

    The PMCC gives you leveraged exposure without borrowing money. It's approved in most IRAs at Level 2 options.

    When to Use Each

    Use a regular covered call when:

  • You already own 100+ shares
  • The stock pays a meaningful dividend
  • You plan to hold indefinitely and want simplicity
  • You're in a retirement account with limited options levels

    • Use a PMCC when:

  • The stock is too expensive for 100 shares
  • You want to diversify across multiple names
  • You're comfortable managing a multi-leg position
  • Capital efficiency matters more than simplicity

    • Setting Up a PMCC Correctly

    LEAPS selection:

  • Delta: 0.70-0.80 (deep ITM)
  • Expiration: 9-18 months out
  • Strike: Low enough that the LEAPS has mostly intrinsic value

    • Short call selection:

  • Delta: 0.20-0.30 (standard OTM)
  • Expiration: 30-45 days
  • Strike: Must be above your LEAPS strike to avoid a debit spread situation

    • Critical rule: The short call strike must always be higher than the LEAPS strike. If it's lower, you have a debit spread with very different risk characteristics.

    OptionsPilot can help you compare regular covered calls and PMCCs side by side for any stock, showing the capital requirement, expected return, and risk metrics for both approaches.