PMCC vs Traditional Covered Calls: Which is Right for You?

When it comes to generating income from options, covered calls have long been a popular strategy. However, the emergence of Poor Man's Covered Calls (PMCC) has given traders a capital-efficient alternative. Let's explore both strategies to help you decide which is right for your situation.

Traditional Covered Calls

A covered call involves owning 100 shares of stock and selling a call option against those shares.

Pros:

• Simple to understand and execute
• Generate income from stock ownership
• Provides some downside protection through premium collection

Cons:

• Requires significant capital (100 shares × stock price)
• Limited upside potential due to call obligation
• Still exposed to significant downside risk

Poor Man's Covered Calls (PMCC)

PMCC involves buying a long-term call option (LEAPS) and selling shorter-term calls against it.

Pros:

• Much lower capital requirement
• Similar profit potential to covered calls
• More efficient use of capital
• Can be used on expensive stocks

Cons:

• More complex strategy
• Time decay affects both positions
• Requires careful strike selection

Which Strategy is Right for You?

Choose Traditional Covered Calls if:

• You want to own the underlying stock long-term
• You have sufficient capital for 100-share lots
• You prefer simplicity over capital efficiency

Choose PMCC if:

• You want to maximize capital efficiency
• You're trading expensive stocks (like AAPL, GOOGL)
• You're comfortable with more complex strategies
• You want to deploy capital across multiple positions

Automation Makes the Difference

Both strategies benefit significantly from automation, which can:

• Optimize strike selection based on market conditions
• Automatically roll positions when profitable
• Manage multiple positions simultaneously
• Remove emotional decision-making

Our platform supports both strategies with intelligent automation that adapts to changing market conditions.