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Poor Man’s Covered Call Calculator

Model your PMCC before you place it. Enter your LEAPS strike and cost plus your short call strike and premium to instantly see max profit, max loss, breakeven, and a full P&L diagram.

Lower Cost Than Covered Call Defined Max Loss Repeatable Premium Income Interactive P&L Diagram
Enter your own trade values. No market data is fetched. Results are estimates from the selected pricing model.

Underlying Asset

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Strategy Template (optional, pre-fills legs below)

Option Legs

Implied volatility is solved automatically from the premium you enter (still editable). Legs with different expirations are supported (calendar spreads). Enter strikes, expiration dates, and premiums manually. You can also enter your own implied volatility.

Getting Started

How to Use This Calculator

Enter four inputs and the calculator handles the rest. Results update instantly as you type.

1

Enter your price and model assumptions

Enter the current stock price or a hypothetical price, then set the risk-free rate and dividend yield manually. The default rates are editable assumptions, not current market data. You can use figures from your broker or your own scenario; the calculator does not fetch quotes or option chains.

2

Set up your poor man’s covered call legs

The poor man’s covered call legs are preloaded for you. Enter each strike, expiration, and premium manually using your trade details or a hypothetical scenario. The calculator works out implied volatility from the premium you enter, and you can still edit it.

3

Calculate and read the results

Click Calculate P&L to see max profit, max loss, breakeven, return on risk, and probability of profit, plus position Greeks: delta, gamma, theta, vega, and rho.

4

Stress test before you trade

Drag the view-date slider to see your P&L curve on any day before expiration, shift implied volatility up or down 50 points, and scan the price-by-date P&L table to see how the trade behaves across scenarios.

This poor man’s covered call calculator prices each leg with your choice of an American-style binomial model (the default for US equity options) or European Black-Scholes-Merton, and accounts for dividend yield. You can set a per-contract commission, copy a shareable link to your exact setup, download the chart as a PNG, and switch to dark mode.

Strategy Breakdown

Understanding the Poor Man’s Covered Call

Key numbers every PMCC trader needs to know before entering the position.

Max Profit
(Short Strike − Long Strike) − Net Debit
Achieved when the stock closes at or above the short call strike at expiration. The spread reaches its maximum value and you keep the full difference minus what you paid.
Max Loss
Net Debit Paid
Occurs if the stock collapses and both options expire worthless. Your loss is capped at the net debit — far less than the risk of owning 100 shares outright through a covered call.
Breakeven at Expiration
Long Strike + Net Debit
The stock price at which the position breaks even at the short call’s expiration. Each short call cycle you complete lowers this breakeven by the premium collected.

The poor man’s covered call works by using a deep in-the-money LEAPS call as a low-cost substitute for 100 shares of stock. Because the LEAPS has a high delta (typically 0.80 or above), it moves nearly in lockstep with the underlying while costing a fraction of what 100 shares would. You then sell a short-term out-of-the-money call against the LEAPS, collecting premium that reduces your net debit each cycle.

The strategy works best in a moderately bullish environment. You want the stock to drift higher slowly, allowing the short call to expire worthless each cycle so you can sell another one. If the stock surges past your short call strike, your upside is capped at the spread width minus net debit, but you still profit. If the stock drops significantly, your loss is limited to the original net debit, unlike a traditional covered call where losses grow with every dollar the stock falls below your effective cost basis.

A key rule of thumb for PMCCs: make sure the width between your two strikes (the spread width) is greater than your net debit. If the spread width is less than the net debit, max profit is negative and the trade is not worth entering.

Worked Example

PMCC Example Trade

XYZ is trading at $100. You buy a 12-month $80 LEAPS call for $25.00 and sell a 30-day $105 call for $2.50.

Position Summary
Stock Price$100.00
Long LEAPS Call Strike$80.00
LEAPS Premium Paid−$25.00 / share (−$2,500)
Short Call Strike$105.00
Short Call Premium Received+$2.50 / share (+$250)
Net Debit−$22.50 / share (−$2,250)
Spread Width$25.00 ($105 − $80)
Max Profit+$250 (if stock ≥ $105 at expiry)
Max Loss−$2,250 (net debit if both expire worthless)
Breakeven$102.50 ($80 + $22.50)
If Stock at $95 at Short ExpiryShort call expires worthless, collect another $250
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FAQ

Poor Man’s Covered Call — Common Questions

A poor man’s covered call (PMCC) is a strategy where you buy a deep in-the-money LEAPS call option instead of 100 shares of stock, then sell a short-term out-of-the-money call against it. It mimics the income-generating nature of a traditional covered call at a fraction of the capital requirement. The LEAPS call acts as a stock substitute, while the short call you sell each cycle collects premium and reduces your net cost over time. It is technically a diagonal debit spread.
The maximum profit on a PMCC is approximately the spread width (short strike minus long strike) minus the net debit paid. For example, with an $80 long LEAPS call and a $105 short call, the spread width is $25. If the net debit paid was $22.50, max profit is $2.50 per share or $250 per contract. This is reached when the stock closes at or above the short call strike at expiration. Collecting additional short call premium over multiple cycles increases your total return beyond this initial estimate.
The maximum loss on a poor man’s covered call is the net debit paid to enter the position. This occurs if the stock drops sharply and both the LEAPS and the short call expire worthless. For example, if your net debit is $22.50 per share, your maximum loss is $2,250 per contract. This is significantly less than a traditional covered call, where your maximum loss approaches the full cost of owning 100 shares minus the small premium received from the short call.
The breakeven on a poor man’s covered call is the LEAPS strike price plus the net debit paid. Net debit equals LEAPS premium paid minus the short call premium received. For example, if you buy an $80 LEAPS for $25.00 and sell a $105 short call for $2.50, your net debit is $22.50 and your breakeven is $80 + $22.50 = $102.50. Each additional short call cycle you complete lowers this breakeven by the amount of premium collected, so the more cycles you run, the lower your effective cost.
A traditional covered call requires you to own 100 shares of stock, which can cost tens of thousands of dollars. A poor man’s covered call replaces those shares with a deep in-the-money LEAPS call that costs far less. Both strategies involve selling a short-term call to collect premium income. The key differences are capital requirement (PMCC is significantly cheaper), max loss (PMCC is capped at net debit versus nearly the full share value for a covered call), and broker approval level (a PMCC typically requires spread approval rather than just level 1 covered call approval).