MJ Poor Man's Covered Call: Strike Selection, Premium & Risk
How to sell poor man's covered calls on ETFMG Alternative Harvest ETF — optimal strikes, expected premium, and the risks that actually matter for a small-cap etf name.
Is MJ a good poor man's covered call candidate?
MJ (ETFMG Alternative Harvest ETF) is one of the most heavily traded ETFs for options strategies. Tight spreads and good open interest across strikes make it ideal for premium sellers. Because MJ is a basket rather than a single name, single-stock earnings risk is diffused, which is a meaningful edge for consistent income.
Strike selection for a MJ poor man's covered call
For a MJ PMCC, buy a long-dated call with 0.80+ delta (typically 12-18 months out) as your synthetic long, then sell short-dated calls 12-18% above the stock price at 0.10-0.20 delta. The LEAPS tie up roughly 30-50% of the capital of buying 100 shares, which is especially valuable on a low share price ticker like MJ.
Expected premium and income on MJ
Typical monthly premium collected on MJ runs around 3.5-6.0% of capital, which annualizes to roughly 42-72% if you sell new contracts every cycle. Capital required to run a single contract wheel on MJ is under $5,000 — the share price and the 100-share lot size set the minimum, not the strategy.
Risk management for MJ poor man's covered call trades
PMCC risk is concentrated at the LEAPS expiration: if the stock collapses, the long-dated call can lose significant value quickly. You also have to manage the short call not going deep in the money against you before your LEAPS appreciates equivalently. On a very high-volatility name like MJ, expect 5-10%+ single-day moves during stress. Size positions so one adverse gap doesn't blow up the account. ETFs diffuse single-stock risk but still carry basket-level exposure — a sector ETF will move on macro shocks even if individual holdings are fine.
MJ Poor Man's Covered Call FAQ
Can you run a poor man's covered call on MJ?
Yes. Buy a 0.80+ delta LEAPS on MJ dated 12-18 months out as your synthetic long, then sell short-dated calls 12-18% above the stock at 0.10-0.20 delta. Capital tied up drops from under $5,000 to roughly 30-50% of that — a meaningful improvement when the share price is a low share price.
What expiration should I use for MJ poor man's covered call trades?
Use 14-28 DTE so you can react to sharp IV crushes and moves as a default for MJ. Shorter expirations let you react to IV resets and price gaps.
Is MJ suitable for beginners selling options?
Not ideal for beginners. Smaller-cap names can have wider spreads and sharper moves. Start with large caps or major ETFs first. Always check the bid/ask spread before entering — anything wider than 5% of the mid price is a warning sign.
Related MJ strategies
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