Selling Covered Calls

The Traditional Covered Call Strategy Involves Owning 100 Shares of Stock and Then Selling a Call Option Against Them to Collect a Premium. You Simply Promise to Sell Your Shares to the Call Buyer for a Cash Premium.

How to Enter a Poor Man’s Covered Call (Pmcc)

You Can Construct the Pmcc Strategy by Purchasing a Deep Itm (In the Money) Call and Selling a Shorter Dated Otm (Out of the Money) Call Against It.

How to Calculate Max Profit / Breakeven

The Most Important Part of Setting up a Poor Man’s Covered Call Is Ensuring You Do Not Have Any Upside Risk. If the Call Option You Sell Is Not High Enough, It May Limit Your Profit When the Stock Moves Up.

Poor Man’s Covered Call Example

To Clarify the Pmcc Strategy, Let’s Look at a Hypothetical Example. We Will Pretend That Stock Xyz Is Trading at $100 per Share, and You Believe It Will Increase to $115 per Share in the Next Two Months.

If You Are Correct in Your Assumption, and Stock Xyz Rises to $115 in 45 Days, You Will Make Money on Both Call Options.

Poor Man’s Covered Call Risks

The Pmcc Strategy Is a Fantastic Strategy When You Are Right. However, If You Are Wrong, You Must Understand the Risks Involved. a Few Scenarios Can Happen That Will Make You Lose Money with a Pmcc Strategy.

1- Stock Xyz Falls to $50 per Share

If Stock Xyz Falls After You Enter a Pmcc, You Will Lose Money on the $90 Strike Long Call Option. Since the Stock Is Below the Strike Price, There Is No More Intrinsic Value, Meaning the Option Can Go to $0 If You Hold It Until Expiration. You Will Still Make the $50 from the Call You Sold, but This Only Covers a Fraction of the Losses Incurred from the $90 Strike Call Option.

2- Stock Xyz Goes Sideways

If Stock Xyz Doesn’t Move, You Will Watch Your Long Call Option Slowly Bleed Due to Time Decay (Theta). You Will Make a Little Bit of Money from the $120 Call Option That You Sold, but You Will Likely Lose More on the $90 Call Option.

Poor Man’s Covered Call Vs. Covered Call

A Regular Covered Call Involves Purchasing 100 Shares of Stock and Selling a Call Against Them. in Comparison, a Pmcc Is When You Buy a Call Option Instead of 100 Shares and Sell a Call Option Against the Long Call Option.

Alternative Strategies to Consider

Another Strategy to Consider Other Than the Poor Man’s Covered Call Is the Wheel Strategy, Cash-Secured Puts, and Covered Calls. These Three Strategies Are Safer Because You Hold Shares Rather Than a Long Call Option.

Pmcc Strategy: Bottom Line

The Pmcc Strategy Can Make You a Lot of Money If the Underlying Stock Moves up for You. Additionally, You Can Use the Strategy with Small Accounts Since You Don’t Need to Purchase 100 Shares of Stock Like a Traditional Covered Call Strategy.

What Is a Poor Man’s Covered Call?

By Sarah Jenkins

• Oct 9, 2026 • 6 min read

Direct Answer • Key Takeaway

The Poor Man’s Covered Call Strategy (Pmcc) Is a Fantastic Method If You Want to Trade Options for Income with Minimal Capital Requirements. the Pmcc Strategy Is a Bullish Trade; Therefore, You Should Use This Strategy When You Believe an Underlying Stock Will Increase in Price.

Sarah Jenkins

Senior Technology Editor & AI Specialist

Sarah Jenkins is a veteran tech journalist with over 12 years of experience covering artificial intelligence, mobile innovations, and digital ethics. Her insights have appeared in leading technology publications worldwide.

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