Compare and Contrast - Poor Man's Covered Call

Video description: A poor man's covered call (PMCC) is a options strategy that is similar to a covered call, but it requires less capital. In a PMCC, the investor buys a long-dated, in-the-money (ITM) call option and sells a shorter-dated, out-of-the-money (OTM) call option with the same underlying stock. The long call option acts similar to owning 100 shares of the stock because of its high positive delta. However, the call option has a much lower capital requirement than owning 100 shares of the stock. The PMCC strategy is often used by investors who are bullish on a stock but who do not have a lot of capital to invest. The premium received from selling the short call option can help to offset the cost of buying the long call option. Additionally, if the stock price does rise, the investor will still profit from the long call option, even if the short call option is exercised. Here is an example of how a PMCC strategy might work: An investor buys a long call option with a strike price of $50 and an expiration date of 6 months. The option costs $2 per share. The investor sells a short call option with a strike price of $55 and an expiration date of 3 months. The option premium is $1 per share. The investor's net cost for the PMCC strategy is $1 per share. If the stock price is at or below $50 at the expiration of the short call option, the option will expire worthless and the investor will keep the premium. The investor will also keep the long call option, which can be exercised at any time before the expiration date. If the stock price is above $55 at the expiration of the short call option, the option will be exercised and the investor will be obligated to sell 100 shares of the stock at $55 per share. The investor will keep the premium from the short call option and will realize a profit of $5 per share ($55 - $50 - $1). The PMCC strategy is a lower-risk alternative to a covered call because the investor does not have to put up as much capital. However, the PMCC strategy also has a lower potential reward. If the stock price does rise significantly, the investor will miss out on some of the gains because the short call option will be exercised. The PMCC strategy is a good option for investors who are looking to generate income from their investments while also limiting their risk. It is also a good option for investors who do not have a lot of capital to invest. #steveganz #SJGtrades #options #SPX #incometrading #RUT #butterflytrade #butterfly #ironcondor #condor #trading #optionstrading #stockoptions #indexoptions #SPXoptions #tradingstrategy #optionseducation #technicalanalysis #marketanalysis #riskmanagement #tradingpsychology #volatilitytrading #ironcondor #butterflyspread #calendarspread #creditspread #debitspread #optionsexpiration #optiongreeks #optionsincome #Johnlocke #dansheridan #Sheridanmentoring #optionstrat