What is a PMCC

A Poor Man’s Covered Call is a covered call alternative that requires much less capital.
Instead of buying one hundred shares of stock, you buy a deep in the money call with a long expiration date.
This acts as your stock replacement. Then you sell a shorter dated call option against it to generate income.

How it works

• Buy a deep in the money call with high delta and long expiration, often six to twelve months out
• Sell a short term out of the money call, usually one to four weeks out
• The long call behaves like stock while the short call collects premium just like a covered call

Example trade

Stock is trading at one hundred dollars

• Buy January 2026 70 call for $35
• Sell October 2025 105 call for $2.50

You spend $3500 on the long call instead of $10000 for one hundred shares.
The short call brings in $250 which lowers cost basis and generates income.
As time goes by you can repeat selling short calls to collect more premium.

Why traders like PMCC

• Much cheaper than buying one hundred shares
• Still allows consistent premium selling for income
• Defined risk compared to uncovered options

Risks and things to watch

• Decay of the long call. You need to hold a high delta LEAPS call so it behaves like stock
• Assignment risk if the short call finishes in the money
• Liquidity and spreads. Pick underlyings with active options markets