I’ve always liked the idea of generating consistent income from stocks — but I don’t always want to tie up the capital to own 100 shares.
That’s where the poor man’s covered call comes in…
It’s a diagonal spread built around the same concept as a traditional covered call, just with a lot more flexibility and capital efficiency.
Instead of buying the stock outright, I buy a long-dated call option — typically a LEAP that’s one to two years out.
LEAP is short for Long-term Equity Anticipation Security, and it’s a long-dated option, typically with an expiration date more than one year out.
Then I sell shorter-dated calls against that long call, ideally collecting premium every 30 to 60 days. That short call acts just like the covered call side of the trade — bringing in credit, reducing my cost basis and creating recurring income potential.
An Example
On TLT, I bought the $65 call expiring in January 2027, which cost me about $24. That’s my upfront debit. I then sold an $89 call against it, collecting $1.50 in premium.
As that expires worthless, I rinse and repeat — sell another one. Over time, I’m working down the original $24 debit and lowering my break-even from $89 to maybe $86.50 or lower depending on how many calls I can sell.
The income opportunity adds up. Every successful short call sale chips away at my cost, and if price goes above the short strike, I can just close both legs for a profit — usually near the short strike price.
If I let it go too long, the broker might auto-pair and assign the short leg, so I like to manage the trade before expiration if price moves fast.
When This Strategy Makes Sense
This isn’t a set-it-and-forget-it trade. Poor man’s covered calls require active management — watching deltas, timing the rolls, and keeping an eye on price.
But when I want stock-like exposure with less capital and the ability to generate income along the way, it’s one of my go-to tools.
It works best when I have a longer-term bullish bias on a stock or ETF but want to lower my capital outlay and limit risk. That’s exactly why I’ve used it on names like TLT, Pfizer (PFE), MicroStrategy (MSTR) and Coinbase (COIN).
The best part is I’m not locked into owning anything permanently — if I get the move I want, I can cash out early.
Poor man’s covered calls are a smart way to trade like an owner — without owning the stock.
I’ll see you in the markets.
Chris Pulver
Chris Pulver Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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