This week I opened two positions built around the same idea: get long-term bullish exposure with a deep-in-the-money LEAPS call, then sell shorter-dated calls against it when the stock rallies.
This strategy is commonly called a poor man’s covered call, or PMCC. The name is informal, but the structure is straightforward: a long-dated call acts as the long leg of a diagonal spread, while a shorter-dated call is sold against it to generate premium.
The appeal is capital efficiency. The danger is mistaking capital efficiency for low risk. A PMCC still carries substantial downside risk, and the short call can limit your upside when the stock moves sharply higher.
My preferred sequence: establish long-term exposure on weakness, then sell premium after strength.
Why I chose high-delta LEAPS
For the long leg, I prefer a call that is already deep in the money and has a relatively high delta. Delta estimates how much the option may move when the stock moves by $1, all else equal.
My SOFI call had a delta near 0.86 when I entered it. That gives it directional exposure similar to approximately 86 shares, although that relationship will change as the stock and the option’s Greeks change.
At the time, 86 SOFI shares would have cost roughly $1,424. The call cost $940—about $484 less upfront. I gained similar directional exposure while preserving capital that can remain available elsewhere.
The capital-efficiency benefit—and the reason leverage still requires disciplined risk management.
That does not mean the call is safer than the shares. The option can expire worthless, experiences time decay and may lose value even when the stock does not fall very far. Leverage reduces the capital committed; it does not reduce the importance of risk management.
Why I opened the two legs separately
Many traders open a PMCC as one combined order. I am deliberately building mine in two stages.
First, I look for weakness. I only consider stocks where I already have a long-term bullish outlook. SOFI was down more than 3% when I bought the long call and was approaching an area I viewed as lower trend support.
Second, I wait for strength before selling the shorter-dated call. I do not want to sell away upside immediately after the stock has already fallen. A rebound can increase the call premium and may let me choose a higher strike while still collecting meaningful income.
That is what happened with IONQ. I bought the Jan. 2028 $20 LEAPS first. When IONQ later rallied more than 5%, I sold the Oct. 30 $55 call for $0.95. That $95 credit immediately reduced the effective cost of the long position.
Buy weakness. Sell calls into strength. The timing will never be perfect, but separating the legs lets each entry serve a different purpose.
The IONQ trade in numbers
Long $20 LEAPS call purchased for $22.35
Short $55 call sold for $0.95
Net position cost: $21.40, or $2,140
Distance between strikes: $35
If IONQ finishes above $55 at the short call’s expiration and the position is valued at intrinsic value, the spread between the strikes is worth $3,500. Subtracting the $2,140 net cost produces a theoretical maximum profit of approximately $1,360.
Simplified intrinsic-value profile at the short call’s expiration; the long-dated call may still retain additional time value.
That is the unusual feature of this setup: a large upside move could create an assignment problem, but it would still be a profitable problem. My upside above $55 would be capped, not erased.
If early assignment occurred, I would not automatically exercise the LEAPS. Exercising a long-dated call can destroy its remaining time value. I would first compare the economics of closing both options, buying shares to satisfy the assignment or rolling the short call.
The real risk is still below me
The attractive upside math should not distract from the main risk. If IONQ or SOFI falls sharply, the premium collected from one short call offers only a small cushion against losses in the LEAPS.
That is why I only consider this structure on companies where I have a long-term bullish outlook. I am not using a PMCC to manufacture conviction in a stock I would otherwise avoid.
I also size the trade as a leveraged bullish position—not as harmless monthly income. Premium can reduce cost basis over time, but it cannot rescue a bad underlying or eliminate expiration risk.
My PMCC checklist
I have a genuine long-term bullish thesis on the underlying.
The long call is deep in the money, high delta and has substantial time remaining.
I can tolerate a significant decline without needing to exit emotionally.
I understand the net debit, breakeven and upside cap before selling the short call.
I sell only one short call for each long LEAPS contract.
I have a plan for a rally, a decline, early assignment and the approach of expiration.
I avoid exercising the LEAPS without first considering its remaining time value.
The takeaway
A PMCC is not simply a cheaper covered call. It is a leveraged bullish position with an income component attached.
My approach is to buy long-term exposure when the stock is weak, then wait for strength before selling shorter-dated premium. Done carefully, the premium can gradually reduce my effective cost while the LEAPS preserves meaningful upside exposure.
But the order matters: conviction first, structure second, income third.
What would you like me to break down next? How I select the LEAPS, or how I choose the short-call strike? Reply and let me know.
Educational only—not individualized investment advice. Options involve substantial risk and are not suitable for every investor.