What is the poor man's covered call strategy?

The PMCC allows investors to participate in the potential upside of a stock's price appreciation while simultaneously generating income through the premium received from selling the call option. However, it's essential to note that the strategy also exposes traders to the risk of the option expiring worthless if the stock price does not rise as anticipated.

The Poor Man's Covered Call (PMCC) is a financial strategy that mirrors the traditional covered call approach with a crucial twist. Instead of directly owning the underlying stock and selling a call option against it, the PMCC involves purchasing a long-term option on the stock.

This strategy is particularly appealing to investors seeking capital efficiency. By utilizing options, traders can effectively mimic the benefits of a covered call without the significant upfront capital commitment required to purchase the stock outright.

A key advantage of the PMCC is its flexibility. Investors can choose the duration of the long-term option, allowing them to tailor the strategy to their specific investment horizon and risk tolerance.

Moreover, the PMCC strategy can be adjusted over time as market conditions evolve. For instance, if the stock price surpasses the strike price of the call option, traders can roll over their position by purchasing a new long-term option and selling another call option at a higher strike price.