How To Do A Poor Man's Covered Call Options Strategy Using A LEAPS

🔥Get Total Access To All My Financial Decisions, Option Plays & Private Discord Chat!   / bradfinn  

In this video I will show you how to make a Poor Mans Covered Call using a LEAPS option
A "poor man's covered call" is an options trading strategy that mimics the traditional covered call strategy but with a less capital-intensive approach. Here's a detailed breakdown of how it works and why it might be used:

Covered Call Basics
A covered call involves holding a long position in a stock and selling (writing) a call option on that stock. The goal is to generate additional income from the premium received for selling the call option, while still holding the underlying stock.

Poor Man's Covered Call Explanation
1. *Underlying Concept:*
Instead of owning the actual stock, the poor man's covered call involves holding a long-term call option (a LEAPS option, which stands for Long-Term Equity Anticipation Securities) and selling a shorter-term call option against it. This is similar to the covered call strategy but requires less initial capital since you're not buying the actual stock.

2. *Components:*
*Long LEAPS Call:* Buy a long-term call option (usually with an expiration of one year or more) on the stock you are interested in. This option gives you the right to buy the stock at a set price (strike price) at any time until the option expires.
*Short-Term Call Option:* Sell a shorter-term call option (with a closer expiration date) on the same stock. This generates premium income, similar to a covered call strategy.

3. *Why It’s "Poor Man's":*
The strategy is called "poor man's" because it allows you to engage in a covered call-like strategy without having to own the stock, which might be expensive. Instead, you use the LEAPS call option, which costs less than buying the stock outright.

How It Works
*Buying the LEAPS Call:* This provides you with long-term exposure to the stock and mimics ownership. For example, if you buy a LEAPS call option with a strike price of $50 and an expiration date one year out, you have the right to buy the stock at $50 any time before expiration.

*Selling the Short-Term Call:* You then sell a shorter-term call option with a higher strike price (e.g., $55) and a nearer expiration date. This generates premium income and provides some downside protection.

Benefits
1. *Lower Capital Requirement:* You don’t need to purchase the stock outright, which requires less capital.
2. *Income Generation:* The premium received from selling the shorter-term call helps generate additional income.
3. *Flexibility:* If the short-term call expires worthless (i.e., the stock price stays below the strike price of the short-term call), you can sell another short-term call, continually generating income.

Risks
1. *Limited Profit Potential:* The profit is capped by the strike price of the short-term call option you sold, similar to a covered call.
2. *Potential Loss:* If the stock price drops significantly, the value of your LEAPS call may decrease, though your downside is somewhat mitigated by the premium received from selling the short-term call.
3. *Opportunity Cost:* If the stock price rises significantly, your profit is capped at the strike price of the short-term call you sold.


In summary, the poor man's covered call is a way to generate income from options trading with less capital outlay compared to the traditional covered call strategy.

--------------------------------------------------------------------------------------------------------
DISCLAIMER: The content discussed in these videos are solely my opinion and should never be used as financial advice. This channel is for entertainment purposes only. Make sure to consult with a professional before making money decisions. This video and description contain affiliate links, which means that if you click on one of the product links, I’ll receive a small commission; all of which helps grow the channel! Thank you for your support!