How to Track a Poor Man's Covered Call (PMCC)

A covered call needs 100 shares. A poor man's covered call swaps the shares for a long-dated call deep in the money (a LEAPS call, typically with a delta of 0.80 or more), then sells shorter-dated calls above the market against it, month after month. The long call stands in for the stock; the short calls collect premium the way a covered call would.

Structurally it's a diagonal call spread: a long call and a short call on the same stock, at different strikes and expirations. The appeal is the capital. In the example we'll carry through this guide, 100 NVDA shares at the June 16 close of $207.37 would have cost $20,737. The LEAPS call that replaced them cost $7,740.

The catch for record-keeping is that there are no shares, so there's no cost basis to adjust. Every premium-tracking habit from the wheel needs a new anchor, and that anchor is the debit you paid for the long call.

The debit still at risk, which TickerScribe calls the adjusted debit: what you paid for the long call, minus the realized result of every short call that has finished (expired, bought back, rolled or assigned). A short call that's still open stays out. Its premium is in your account, but until the call finishes it can still turn into a loss, so it isn't income yet.

Let's start the example. The NVDA prices below are its actual daily closes; the option prices are illustrative, and one contract is 100 shares, so every per-share figure times 100 is the amount on the ticket.

• June 16, NVDA at $207.37: buy one January 21, 2028 $150 call for $77.40, a $7,740 debit. Same day, sell the July 17 $230 call for $2.70.
• July 17: NVDA closes at $202.80 and the $230 call expires worthless. Its $2.70 is now realized.

Two things follow from that number. Your break-even is the long strike plus the adjusted debit: $150 + $74.70 = $224.70 is where NVDA has to be, when the LEAPS expires, for the whole trade to be ahead. And the same line decides where you can strike the next short call.

Above the long strike plus the adjusted debit. Here's why. If the stock runs far past your short call, the pair is worth at least the gap between the two strikes, since the long call can always be exercised at its strike. Leave the long call's remaining time value out (the cautious case) and that gap is what you walk away with. If it's smaller than the debit still at risk, a rally locks in a loss on a trade that was right about direction.

The line moves every time a short call finishes, which is why it has to be a running number. On June 16 it sat at $150 + $77.40 = $227.40, and the $230 call cleared it. On July 20, with NVDA at $203.33, the line had dropped to $224.70, and the August 21 $225 call, sold for $2.90, cleared it by 30 cents. Without July's premium, that strike would have been under water before the trade started.

As one ticket inside the same position: buy back the short call you have, sell the next one. The roll's net is the new premium minus the buyback cost, the same rule as in how to track option rolls. What a PMCC adds is timing: the bought-back call is finished, so its result is realized on the day you roll, while the new call's credit waits until that call finishes.

Back to the example. On August 14, a week before expiry, NVDA closed at $225.16, right on the short strike. You roll up and out: buy back the August $225 call for $5.15 and sell the September 18 $235 call for $7.40. That's a $2.25 net credit on the roll. But the August call, sold for $2.90 and bought back for $5.15, just realized a $2.25 loss.

The debit went up before it came down, and that's the honest picture: on August 14 the trade really had given back $225 on the August call, and the September credit could still have gone the same way. Count a credit before its call finishes and the number looks better than the position is. On September 21, with NVDA at $227.30, you sell the October 16 $245 call for $3.55. The line is now $150 + $69.55 = $219.55, comfortably below. If that call expires too, the debit lands at $66.00.

Because it books each contract on its own. The LEAPS call sits in your positions at its $77.40 cost, carrying its own unrealized P&L. Each short call is a separate trade that opened, closed and dropped off the screen. The August buyback shows up as a $225 loss with nothing to say it was half of a roll, and nothing anywhere subtracts the realized short-call income from what the long call cost you.

Read the trade off that view and you'd say you paid $7,740 for a call and lost $225 on another one. What actually happened is that the short calls have banked $785 so far (+$270, −$225 and +$740) against a $7,740 debit, leaving $6,955 still at risk. That's the number you trade against, and it's the one your statement doesn't print.

In TickerScribe's options journal a PMCC is one position from the first trade to the last. The long call and every short call are legs of it, rolls chain inside it, and the debit still at risk is a column you can turn on. It's free, and there's no credit card.

1. Open the long call

On Option Trades, choose Single Leg and record the buy. You can paste the option symbol (NVDA280121C00150000 here) into the symbol field and the type, strike and expiration fill in for you; add the price and the trade date.

2. Sell each short call with Add Leg

The long call now has its own row in the table, a Long Call. Open the menu (⋯) at the end of that row and choose Add Leg.

Enter the short call in the dialog that opens. It joins the long call's position instead of becoming a trade of its own, and the strategy is detected again from the legs that are open, so a long call plus a short call reads as a Diagonal Call Spread. Every later short call goes the same way, from the same row, which now holds the whole position. To call it a PMCC instead, set a strategy display name under Label & tags…

3. Expire, buy back or roll the short call

Each short call is finished from its own row. Mark as Expired when it runs out worthless, Buy to Close when you take it off early, and Roll when you move it up or out. The rest of the position stays open whichever you pick. The Roll dialog shows the buyback cost, the new premium and the net in one summary, and the old and new calls stay linked inside the position.

4. Turn on the Adjusted Debit column

The adjusted debit is a column on Option Trades, off by default: add Adjusted Debit from the Columns menu. It sits on the position row and follows the same rule as this guide, counting short calls once they've finished and leaving open ones out. Hover the value for the breakdown, which in the example reads $7,740.00 linked long-option net debit − $785.00 realized short-leg profit = $6,955.00.

Divide by 100 for the per-share figure, then add the long strike for the break-even: $150 + $69.55 = $219.55. That's also the line the next short strike has to clear.

5. Closing, assignment and importing

When you're done with the trade, Close Position closes the long call and any open short call together. If a short call is assigned, mark that one leg as called away and the rest of the position stays open; since a PMCC holds no shares, it's recorded as assigned uncovered. Most PMCC traders roll or close a threatened short call before it gets there, which is what the August roll did.

Already have the history at your broker? Import its export, and each short call written against a long call you hold lands in that long call's position, so the whole ladder arrives as one trade rather than a pile of contracts.

What is the cost basis of a poor man's covered call?

There isn't one in the share sense, because a PMCC holds no shares. The number that does that job is the adjusted debit: what you paid for the long call, minus the realized result of every short call that has finished. In the example that's $77.40 − $7.85 = $69.55 per share.

Does a short call's premium lower my debit as soon as I sell it?

Not yet. Until the call expires, is bought back, rolled or assigned, its premium can still turn into a loss, so it stays out of the adjusted debit. It counts on the day the call finishes.

How do I log a rolled short call on a PMCC?

Roll the short leg inside the same position: buy back the old call and sell the new one in one ticket. The old call's result is realized at the roll (often a loss when the stock has run), and the new call's credit counts when it finishes. The roll's net is the new premium minus the buyback cost.

What is the break-even on a poor man's covered call?

The long call's strike plus the adjusted debit per share. With a $150 long call and $69.55 still at risk, that's $219.55: the price the stock needs to be above, when the long call expires, for the whole trade to be ahead.

Where should I strike the short call on a PMCC?

Above the long strike plus the adjusted debit. If the stock runs through your short call, the pair is worth at least the gap between the strikes; when that gap is smaller than the debit still at risk, a rally can lock in a loss on a trade that was right about direction.

Can I import PMCC trades from my broker?

Yes. Import your broker's export, and each short call written against a long call you hold lands in that long call's position, so the long call and its short calls arrive as one trade.