Poor Man's Covered Call: The Covered Call Without the Full Share Count
Intermediate · 8 min read · Updated April 2026
A poor man's covered call (PMCC) replicates the income loop of a covered call using a fraction of the capital. Instead of tying up $18,000+ to own 100 shares of AAPL, you spend about $4,000 and still collect monthly premium.
The one-line version
Buy a long-dated, deep in-the-money call (a LEAPS) as your stock substitute. Sell a shorter-dated, out-of-the-money call against it every month. Collect premium. Repeat.
Two legs. Same income loop as a covered call. Less capital tied up.
Why it works
A deep in-the-money LEAPS call moves nearly dollar-for-dollar with the stock. If AAPL goes up $1, a deep LEAPS gains roughly $1 too. That makes it a viable stand-in for 100 actual shares — at a fraction of the cost.
With that “synthetic” 100-share position, you can sell short-dated calls against it, just like a regular covered call. The premium collected each month is your income.
A real AAPL example
AAPL is trading at $187. A classic covered call needs 100 shares — $18,700. The PMCC alternative:
Leg 1 — buy a deep LEAPS call
Buy one AAPL call at the $140 strike, expiring in 400 days. Today that costs roughly $52 per share, or $5,200. It moves like owning 100 shares, but you tied up far less capital.
Leg 2 — sell a short-dated call against it
Sell one AAPL call at the $200 strike, expiring in 35 days, for $1.50. That puts $150 in your pocket today.
Net cost of the whole position: roughly $5,050 vs. $18,700 for the regular covered call. You collect the same $150 premium and can repeat the process monthly.
What happens next — three outcomes
AAPL drops before expiration
The short call expires worthless. You keep the $150 premium. Your LEAPS lost some value, but you can sell another short call next month.
AAPL drifts between $187 and $200 (most common)
The short call expires worthless. You keep the $150, your LEAPS is roughly unchanged, and you sell another short call for next month.
AAPL closes above $200
Your short call is assigned. You close the trade (either by exercising the LEAPS and delivering shares, or by closing both legs for a net profit). Capped upside — same as a regular covered call.
When PMCC makes sense — and when it doesn’t
Use it when…
- ✓The stock price is too high to buy 100 shares comfortably
- ✓You want the covered-call income loop with less capital
- ✓You're bullish-to-neutral on a stock you'd hold long term
- ✓LEAPS calls are available with reasonable premium
Avoid it when…
- ✗You already own 100+ shares — just sell regular covered calls
- ✗You think the stock is about to crash
- ✗Implied volatility is extreme (LEAPS premium will be expensive)
- ✗The stock doesn't have liquid LEAPS options
How to pick the LEAPS strike
Look for a strike that’s 15–30% below the current stock price, with at least 12 months to expiration. The deeper in-the-money the LEAPS, the more it behaves like the stock. You want a delta of 0.80 or higher if you can find it.
The short call you sell against it follows the same rules as a covered call: 30–45 days out, 20–30 delta, above the stock price.
Common questions
What is a LEAPS call?
LEAPS stands for Long-term Equity AnticiPation Securities — simply a call option with more than a year until expiration. Deep-in-the-money LEAPS (with a low strike relative to the stock price) act as stock substitutes because they move nearly dollar-for-dollar with the underlying.
Why not just sell covered calls on shares?
If you already own the shares, sell covered calls. The PMCC is for traders who want the same payoff but can’t or don’t want to tie up $18,000+ for 100 shares of a higher-priced stock. It cuts the capital requirement by 60–80%.
What's the biggest risk of a PMCC?
A hard stock crash hurts the LEAPS more than an equivalent share position would (time decay plus volatility collapse). The strategy also caps upside at the short-call strike. Pick stocks you’re fundamentally okay holding.
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