Options Income
Poor Man's Covered Call
Buy a deep in-the-money, long-dated call as a stand-in for owning the stock, then sell short-dated calls against it over and over. Same income mechanic as a covered call, built on a fraction of the capital.
Build the income tower
The gold block at the base is the LEAPS call, a stock substitute bought once. Every time you click "sell next cycle," a new short call gets sold against it and stacks on top, each one collecting its own premium. Watch the capital bars on the right the whole time: the tower is being built on less money tied up than buying the shares outright.
How it works
- The LEAPS call stands in for the shares. A deep in-the-money call with a year or more left moves almost dollar for dollar with the stock (a high delta), but costs a fraction of buying 100 shares because most of its price is intrinsic value, not extrinsic premium.
- Every short call sold against it works like a normal covered call. Pick a strike above the current price, collect the premium, and repeat on a short-dated cycle, typically every four to six weeks, for as long as the LEAPS position is held.
- The LEAPS itself is not a static, risk-free base. It's a long option with its own time decay and its own delta, both working against the position the whole time the tower is being built. Its extrinsic value bleeds away as expiration approaches, same as any long option, even while the short-call premiums keep coming in.
- The capital saved is the entire argument for using this structure over an ordinary covered call. Less money is tied up in the stand-in position, which is what makes the same income mechanic reachable on a smaller account, but it also means the position is more sensitive, in percentage terms, to a move against it than 100 actual shares would be.
Where this breaks
The stock substitute has its own clock running
Click through all six cycles and watch the "LEAPS extrinsic remaining" stat next to the total premium collected. The LEAPS is decaying the entire time it's being used as a base for this tower, and if the stock drops far enough, the LEAPS loses value faster than short-call premiums can replace it, since a lower stock price also means less room to sell calls without capping the position too close to money. This isn't a free way to run a covered call on someone else's capital. It's a smaller, more time-sensitive position doing the same job.