How do you trade a Poor Mans Covered Call 💰 Poor Mans Covered Call versus Covered Calls (PMCC)

[@StockandOptionMyLifeOfLearning]

►► AVAILABLE NOW! Limited to the FIRST 100 people, get my brand new online Option Trading course (Intermediate option trading) for $497. Regular price is $997. Here is the link to check it out: mylifeoflearning-randy.mykajabi.com/offers/EgeavtWJ Join my Patreon to get access to my all my Stock & Option Trades, Open Orders and Weekly Top 5 Stocks: www.patreon.com/mylifeoflearning Subscribe to this Channel: kzbin.info New Beginnings: The Option Trading Story amzn.to/2OgXx58 Limited time: Get 2 Free Stocks on Webull when you deposit $100 (Valued up to $1,850): www.webull.com/activity?inviteCode=MfCJx4xeKzuw&source=invite_gw&inviteSource=wb_oversea Facebook: facebook.com/jamiston.queens.5 Website: mylifeoflearning.com/index.html

[@zombiedriver7442]

If I subscribe to a lower level can I get credit towards an upper level if I choose to move up?

[@StockandOptionMyLifeOfLearning]

Thank you for your interest! Absolutely! If you subscribe on Patreon and decide later that you want to subscribe to a higher tier then you would just pay the difference. Let me know if you have any other questions.

[@TheLeadsteer]

10:00 Oh, wow. I love this... I'm going to subscribe to this channel and watch every video.

[@StockandOptionMyLifeOfLearning]

Thank you for your support David!

[@lin-joglobal769]

You are so smart!!! This is solid gold! I didn’t quite understand it all that you said about the Greeks even though I have done a PMCC go figure. I am going to replay this over and over.

[@StockandOptionMyLifeOfLearning]

Thank you for your support! I really appreciate it. 😊

[@masoudmokhtari8997]

another beautiful day, starting with awsome teaching videos from Randy with great explanation. Thank you Randy

[@StockandOptionMyLifeOfLearning]

You're awesome! Thank you so much for that and for your support! 😊

[@ZSharkPH]

Great explanation of your system. Thank you for sharing.

[@StockandOptionMyLifeOfLearning]

Thank you for that and for your support!

[@chronosdog3606]

This is very well done and the information is appreciated. Thanks!

[@StockandOptionMyLifeOfLearning]

Thank you so much for your support! 😊

[@ckn9413]

Great video, this is mt second time watching. Still have these questions after going through all the Q&A: 1.) Is PMCC a BULLISH or BEARISH strategy? Bullish means you are quite confident that the stock you apply PMCC will go up in time to come? 2.) Do you start PMCC on a stock "on its own" or it is remedial action plan? Such as you got struck with CSP position then apply PMCC to repair your position or you just initiate PMCC on a stock that you like and believe it will go up? 3.) IF PMCC is a remedial plan then it looks a bit illogical to me; it all happens because it is a CSP that goes wrong (the stock tanks instead of going up) then we try to fix it using PMCC (means we expect stock price to shoot up again), so it is a counter-trend move? 4.) Last question, the PMCC strategy will not work if the stock continues its downtrend even it doesn't go below the long call strike price because it hurts the long call more than the short call, right?? Thanks!

[@StockandOptionMyLifeOfLearning]

Thank you. Those are great questions! Typically a PMCC is a neutral to bullish position. I generally start out as a PMCC, although if I'm trading in a stock with a low dividend or one that does not pay a dividend, I will switch from a CSP to a PMCC (kzbin.info/www/bejne/g3y8fImon5x2nMU). Generally, depending on the Delta of the two options, the longer LEAPS call may go down more than the value the short near term call. Although you could always continue to roll the short call down if the stock continues to decline. You could apply similar techniques to repairing a covered call: kzbin.info/www/bejne/nWHWdpSEbZKZatE and kzbin.info/www/bejne/l3yQn4OOj5abd6M and kzbin.info/www/bejne/oXm5gmqMpb1njaM

[@learningyt4725]

interesting, so the overall theta is positive and delta positive. just have to close this trade before theta becomes negative. thanks for sharing!

[@StockandOptionMyLifeOfLearning]

Also keep an eye the Delta of your short call vs the Delta of your long LEAPS call.

[@jmg1962]

Two crucially important advantages to selling a covered call on shares you own as opposed to selling a poor man's covered call: 1. Some Call LEAPS have very high extrinsic value due to having consistently higher IV than most stocks. TSLA is a great example that taught me this lesson the hard way. I bought a LEAPS on TLSA in January or February of 2021 expiring June 2022 thinking it was headed to the moon. TSLA IV is extremely high and for the vast majority of 2021, TSLA dipped to a price consistently lower than the price it was when I bought the call in early 2021. In fact, it didn't even start to increase above these lower points until late 2021. Even though I was selling PMCCs throughout the year, my. LEAPS was consistently down much lower than had I owned the shares because I was paying theta and remained hopefully for a significant increase to cover the extrinsic value cost of the long call. At this point, it's deep ITM and I'd be a fool to roll forward and pay so much more premium for another much high IV long call. So just before contract expiration, I'm just going to exercise it to avoid paying high premiums for the high IV stock. 2. The second advantage to owning shares relates to what happens when you face an assignment due to your weekly being exercised by the buyer or the buyer's brokerage. Let's say you sell an OTM call and as the expiration approaches, the share price is getting close to your strike price. On Friday after market close at 4PM EST, your weekly you sold goes ITM and the buyer exercises the weekly call. At this point, your brokerage will force you to be short 100 shares x number of calls you sold! You owe those shares back to your brokerage. At this point, you're sort hundreds of shares, you have a pile of money and a LEAPS option expiring more than 1 year out. What do you do? You have little choice but to exercise your LEAPS and lose all that time value on your long call! Understand what I mean? These are extremely important factors someone should take into account when deciding between selling a regular covered call while owning the shares and selling a PMCC holding LEAPS.

[@StockandOptionMyLifeOfLearning]

That’s really good information! Thank you for sharing! I have a playlist dedicated to LEAPS and PMCCs. Here’s the link if you’d like to check it out: kzbin.info/aero/PL3j38I2YtGw3d2osU5O6XRHJ8-Wul2ZW7

[@esperanzagarcia4360]

What about now that Tesla and all the companies are way down to me is a god time to buy long call what do you think,apple ,Netflix,Disney do the leap now I thin we are in a low risk ,well not one knows where in the bottom,

[@StockandOptionMyLifeOfLearning]

I have begun to buy more stocks outright as the market has been dropping and plan to do so more aggressively if it continues to drop: kzbin.info/www/bejne/q5TZk2OQedeFbLc I have also begun buying more LEAPS calls than normal.

[@laivincent561]

Very good I need to study it a few times to really digest it

[@StockandOptionMyLifeOfLearning]

Thank you for your support! 😊

[@edbrandt8972]

Good real world example of how to manage a position that goes south on you and still make $. Thanks Randy

[@StockandOptionMyLifeOfLearning]

Thank you for that Ed and for your support!

[@hga7079]

Hi Randy I want to know the difference between poor man covered calls and selling deep in the money puts coupled with selling short dated naked calls. In the first you buy DITM LEAPS at a high delta and then sell short dated calls against them. In the second, you sell DITM puts at also high delta and then sell short dated calls against them. You said, in poor man covered calls all you could lose is the value of the call as opposed to more losses and more margin requirement if you sell DITM puts. But, you do not lose the value of the put, you can always role them out for more credit instead of rolling the LEAPS for a debit. Thank you .

[@StockandOptionMyLifeOfLearning]

I believe you will find most of your answers in the video: kzbin.info/www/bejne/in_ZaJKXjKd8rLc If you'd still like more information on LEAPS this playlist has a lot of really good information on them: kzbin.info/aero/PL3j38I2YtGw3d2osU5O6XRHJ8-Wul2ZW7 The biggest factor is that with a DTIM put if the stock advances to or higher than your strike, you are then naked a call. With a DITM LEAPS call, the delta of the LEAPS call you own will go up as the stock price increases.

[@ButchB1000]

Love to see an update on this position now that BIDU is under $80

[@StockandOptionMyLifeOfLearning]

We exited this position for a loss on 8/27/21 because I no longer liked some of the things that the Chinese government was doing to its companies, even though I still like BIDU as a company.

[@ngchongsin2009]

Good video! With the leap call buy, we should choose theta which is lower in negative value. Hence this option value will retain. With the sell call, we should choose theta which is higher in negative value. Hence this option will lose its value and we can close or buy back at a lower price. Is the above understanding correct?

[@StockandOptionMyLifeOfLearning]

Hey Martin if I understood the way you described it correctly, that is correct. You want the theta of the short near term option to be (quite a bit if possible) higher than the theta of your long LEAP option. And personally, I like delta to be the same. Quite a bit higher for my long LEAP option and lower for the short near term option.

[@ngchongsin2009]

@@StockandOptionMyLifeOfLearning thank you

[@HeavyMetalAlpha]

I appreciate how transparent you are with your portfolio and your trades. It really helps to learn the details and not make small mistakes. Few questions..why did you choose to sell a call so far out of the money? I understand that it will decay quickly but in the case of BIDU the other strikes were priced crazy high. Also, when you set up a pmcc, will you receive stock appreciation if your account has enough buying power to exercise your leaps call to cover the otm near term call? Or is that only when you own the actual stock?

[@StockandOptionMyLifeOfLearning]

Thank you for your feedback Jim and for your support! 😊I sold that OTM call because that was the strike of the put option we had sold. I prefer to sell the same or higher covered call/PMCC short call option strike price to allow for at least, getting out at the same price I got into the position or at best, getting out with some stock/PMCC appreciation while pocketing cash from selling call options. I'd like to stay in this BIDU position for as long as it make sense and plan to roll the short strike price up on the call optin if BIDU goes up. By owning the DITM LEAP call option, as BIDU goes up, the value of that call option will also go up (by ~ 96 cents for every dollar) so we can benefit from stock appreciation even while owning the LEAP call but not the stock.

[@PHILLY-cp8xb]

Hi Randy I’ve recently subscribed to your channel and find myself learning a lot. I’m pretty new to investing and have really been able to correct some of my current positions you using technics from your videos. I’m wondering your thoughts on getting out of positions that margin has been used to purchase when that stock is down. Would love to know how to become one of your students.

[@StockandOptionMyLifeOfLearning]

Thank you for your question and support! We post all our trades as well as the reasoning behind the trade on Patreon. If you'd like to join, here's the link: www.patreon.com/mylifeoflearning In order to answer your question about getting out of a position that has been using margin when a stock is down, I would need to know all the details of the position.

[@frontpineapple4489]

Hi Randy, This is an awesome video. I learned a lot from it. Thanks for teaching us. I really appreciate it.

[@StockandOptionMyLifeOfLearning]

Thank you for your support!

[@FPLFantasyArabia]

Thanks for the valuable info. What happens in case of your PMCC closed above your stoke price? Do you loose your Leap contract ? Or ? Thanks 🙏

[@StockandOptionMyLifeOfLearning]

Thank you for your question and support! If at expiration (~603 days) BIDU is above our $80 strike price and we didn’t do anything with it, then we would buy BIDU automatically at $80.

[@ExctasyGFX]

Thank you for your video. Can you go over what happens if the stock shoots up in price (either spontaneously or due to an event) and it goes past your short call option strike price? Thank you!

[@StockandOptionMyLifeOfLearning]

Thanks for the question and your support! Here is the answer I gave to one of my Patreons this morning for a similar question (www.patreon.com/mylifeoflearning): If BIDU shots up to $230 here are the possibilities: 1) It falls back below our strike price by expiration & we let it expire or roll it out (maybe up or down and out) for a credit (cash into our pocket) 2) The stock is called away from us because of the short near term call we sold. This should only happen if there’s no time value left in the short option. Our goal though is to roll it before time value = $0 or close to that. But if it’s called away from us, we will still be long the Jan 2023 $80 LEAP call. We will also be short 100 shares (per contract) of BIDU because the stock is called away from us. The short stock and long LEAP $80 call should pretty much offset each other in gains and losses. If this scenario happens then it’s decision time for us. Do we buy the 100 shares and sell our $80 LEAP call to close the position OR do we buy the 100 shares back and sell a new near term call option. At this moment I’d lean towards buying the 100 shares and selling a new near-term call to keep the party going.

[@coolsun777]

Very informative and great video Randy! Much appreciate for sharing! Just so that I fully understand the selling the covered/uncovered call-options, is it a most for me to buy back/close my open sold call-options positions on or before its expiry date even if the option strike price I had sold is still out-of-the-money on the expiry date? Or, I have nothing to worry, if the stock price is trading bellow my sold call-option strike price? Is there any exception to this understanding?

[@StockandOptionMyLifeOfLearning]

If the underlying stock is trading below a short call option's strike price through the assignable time frame, then the stock will not be assigned to you. If I'm selling a new farther dated call though, I like to close them out when I roll the call unless it's expiration day and the stock is pretty far OTM. If you don't close the nearer term call, just know that you are naked 1 call option until expiration.

[@edbrandt8972]

Hello Randy. Let me see if I understand this strategy. You are bullish on the UL stock but the long side is a leap option which is cheaper than owning the stock. You then want collect premiums on selling the calls short OTM with a shorter expiration date. Long term you hope to profit off the leaps by selling them for a profit after closing the short position or allowing it to expire worthless. If you needed to roll this strategy, would you roll the short & long calls at the same time as a pair or by itself. Thank you

[@StockandOptionMyLifeOfLearning]

Hey Ed thank you for your question and support! All that sounds good. Just to clarify, you will be rolling the short near term expiration option more often than the long term one you own and the long and short options can be rolled at different times. I believe that’s what you mentioned but I just wanted to make sure.

[@edbrandt8972]

I am using a paper trading account to practice with a PMCC using IWM as my UL security. I only used a small fraction of my "paper money" to open the strategy.

[@StockandOptionMyLifeOfLearning]

I like that you are using a paper trading account to get some practice. Very smart! 👏

[@787roofdog]

Great video, I would ask your broker if they allow LEAPS PMCC plays (Diagonal credit spreads) before purchasing a LEAPS contract... currently Webull does not.

[@StockandOptionMyLifeOfLearning]

Thank you for your support!

[@stitchergary]

If you've never seen a man's head spin around 720 degrees, then you missed out seeing me at the end of this video....I think I'll need to watch this about a 100 times to start understanding what's going on....thanks for the video (whatever it said)..

[@StockandOptionMyLifeOfLearning]

😂 Thank you for that! That was awesome! Here is a video series I made that goes more in depth into LEAPS and PMCCs if you'd like to check it out: kzbin.info/aero/PL3j38I2YtGw3d2osU5O6XRHJ8-Wul2ZW7

[@options888]

What are your most favorite and profitable trades, I’ve done ton of research the last one year and also traded myself, would you agree that selling puts, and LEAPS are the profitable trades yourself?

[@StockandOptionMyLifeOfLearning]

I think my favorites are in the order: I like the simplicity and return of selling puts. But I like the potential of doing PMCCs for potential appreciation as well as protection if the underlying were to experience a sharp decline. I also like the ability to manipulate a PMCC using CSPs and credit spreads or naked calls (kzbin.info/www/bejne/oXm5gmqMpb1njaM) And I like covered calls because of potential stock appreciation if I can roll the strike up as well as receiving a dividend. Dividends are like a little bonus that I tend to forget about. I guess I like them all for different reasons but my favorite is CSPs.

[@esperanzagarcia4360]

Hi now they the stocks are very cheap it’s a good idea to do a poor mens cover calls I been studying this strategy looks 👍

[@StockandOptionMyLifeOfLearning]

I am starting to be more aggressive with buying stocks outright and buying LEAPS call options. Please keep in mind that no matter how far a market has fallen, it can still fall more. The saying I like to keep in mind is: “the market can stay irrational longer than you can stay solvent” if a trader uses too much margin or leverage. I’m buying more aggressively than I have over the past year and a half or so, but I also know that the market could continue to decline. I’m good with that. I plan to try to buy more and more if that happens.

[@esperanzagarcia4360]

Hi how are you ,What do you think 🤔 I have my savings in the bank in a savings account I already put a lot of that savings in the marquet and I lose it because I started buying Tesla calls you know they are very expensive and end losing 30k But sadly I learned that lesson at the hard way. now if I get some more of my savings and sell puts in apple,Amazon and Disney (the are the companies I would like to have in my portafolio if have to pick some ) and if I get assigned I just can do cover calls y definitely I well put my money to work and the probability for me to loss that money again ir reduce a lot compared to buying Tesla calls What would be your advice.

[@StockandOptionMyLifeOfLearning]

I like your line of thinking. I only trade in what I consider solid, mature, and consistently profitable companies. I also don’t use any or very little margin and leverage. If that’s your philosophy and you are in it for the long term, then I like it.

[@esperanzagarcia4360]

@@StockandOptionMyLifeOfLearning thank you 🙏 for responding the messages very much appreciated ❤️❤️

[@georgewong4453]

If sc becomes Tim, u write another sp, then face naked sp risk. Is it really good to save the sc assignment?

[@StockandOptionMyLifeOfLearning]

It is situation specific. However, if you give me the timestamp you're referring to, I'll be glad to elaborate.

[@115764]

If you have the cash available do you need to have a margin account to do a PMCC? Does a PMCC require a level 3 options trading?

[@StockandOptionMyLifeOfLearning]

This is a great question but unfortunately, I don't think I can provide a definitive answer. I hear different things from different brokers. I would suggest contacting your broker to get the answer that's specific to your account.

[@SuperFS11]

Thanks! Good stuff. Got hit badly with margin interest from trying CC and WFC. This would have made much more sense now. But don’t you need at least level 3 to be able to do these?

[@StockandOptionMyLifeOfLearning]

Quite possibly. I’m not sure what level would be required to do PMCCs.

[@Prosperousprotocols]

WTF is level 3?

[@StockandOptionMyLifeOfLearning]

There are several different levels of options trading capability based on experience. Each level allows an option trader to do different types of option trades.

[@mcgragor1]

You mentioned using covered calls on div paying stocks. I have an example and would like to see what you would do in this situation. I have 200 shares of T at close to 31 per share. Its currently trading at 29.11 as I type this. The 31 weekly calls are basically a penny. Go out a month and they are just 11 cents. Could I ask what you would you do in a situation like this, maybe even do a video about it and if you already have one, please point me to it. Thanks, I really enjoy your teaching style.

[@StockandOptionMyLifeOfLearning]

Hey McGragor like you, I too own some T. I'm also looking for an opportunity to sell new put options in it. With your situation, I'd run the annualized cash on cash return for the next 3 or 4 monthly expirations to see which one gives you the best return. If you're like me, you'd prefer to not have to sell the stock for less than you bought it (unless something fundamentally changes with the company). The nice thing with T, is that you'll still be getting that dividend even though it looks like T will most likely cut its dividend some over the next year or so. I still like the company and plan to keep trading it in our option account and holding it in our holding account. If you haven't seen all them already, you might like to watch these videos on CCs: kzbin.info/aero/PL3j38I2YtGw0GuZi4OOSzGcx3Oq_SMr2K Let me know if you have any other questions.

[@mcgragor1]

@@StockandOptionMyLifeOfLearning Thanks so much for your response. Appreciate your help.

[@hydroz2z]

I'm in this situation right now with LAC. Sold May $32.50 20 Puts for $3.29. Today the stock has tanked to $26.88; a 26% decline. The option is selling for $6.60 today. I'm thinking I really screwed up, yet, using your techniques, I can roll this to Jan 20/23 $27.50 for $7.30 and collect some premium. It's a long time to freeze up the cash, but it keeps me from loosing or being assigned. It seems to make sense to me. My questions are: what do you think of this move and why would I swap to a LEAP strategy, like you did in this video, and why did you switch when you could have just rolled out and down?

[@StockandOptionMyLifeOfLearning]

If you can roll it down and you still feel good about that, especially if you think the stock is leveling off, then rolling to put is probably the best alternative. However, if you still feel comfortable being in a bullish position in it but aren’t sure if it’s going to continue declining or not, that’s when I’d probably switch over to a PMCCs. I made a whole video series on how to repair a position that has against you. If you’d like to check it out here’s that link: kzbin.info/aero/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9

[@hydroz2z]

@@StockandOptionMyLifeOfLearning Thanks for contributing to "My Life of Learning". You are a fantastic teacher. After watch your videos and taking a look at the far-out option chain, I'm thinking I'll roll out and down to Jan 20 $27.50. I'll get out of my current position, May 20 $32.50 and still capture about a buck of added premium. It's so long to have that cash secured, though.

[@KeeptheChange41]

Can you please explain what happens if the short call gets assigned?

[@StockandOptionMyLifeOfLearning]

Hey Robert thank you for your question and support! If you have sold a naked call option, which means you do not own the stock to cover it, if the call option is assigned then the broker will pull 100 shares for each contract that was assigned out of your account. Since you don't own the stock, you will be short those 100 shares per contract. However if you did a covered call equivalent to the number of shares you own, then the stock you own would be called away/sold.

[@benspurgeon6273]

Do you have to roll your short call or can you let it expire and sell another short call against your leap. I assume you would want to roll your short call if it was in the money so you wouldn’t be forced to cover your long position. Please correct me if I’m wrong. I’ve never attempted a poor man’s covered call.

[@StockandOptionMyLifeOfLearning]

I pretty much always roll them. If they are OTM and obviously going to expire worthless I might consider letting it expire worthless and sell a new one on the expiration day of the one that was about to expire worthless. You might find this video interesting on rolling PMCCs: kzbin.info/www/bejne/nWHWdpSEbZKZatE

[@technow7551]

Can you do the PMCC in an IRA account? And at what level? Thanks.

[@StockandOptionMyLifeOfLearning]

Thank you for your question and support! It's my understanding that you should be able to it's just a matter of the margin requirement of your broker. However, I have never done a PMCC in an IRA so I can't say this with 100% confidence. We have only done them in none IRA trading accounts.

[@xingu6554]

Hi, I just wondering, with pmcc, what is your strategy if the share prices smash through the strike price for long term call option you bought

[@StockandOptionMyLifeOfLearning]

If I no longer feel good about the company I exit the position no matter what the price is. However, most likely, if I'm still long term bullish on a company, then once it settles down and appears to be stabilized or even in a bullish trend again, I would consider rolling the long call down to ITM. Until that happens, I'd consider selling calls against it maybe even using my LEAPS call to do a bearish call credit spread.

[@xingu6554]

@@StockandOptionMyLifeOfLearning by rolling the long call down to ITM, does that mean you close the long call, and buy another long call at deeper in the money?

[@StockandOptionMyLifeOfLearning]

Exactly 👍

[@xingu6554]

@@StockandOptionMyLifeOfLearning sweet! Thanks so much

[@damiankhoo5569]

Hi Randy in the example of BIDU PMCC, what happens when at expiry of the short call (Jun18'21-210-Sell Call), the share price of BIDU goes pass $210, let's say for example $230. That means i have to buy 100 shares of BIDU right? Instead of buying in the open market for $230 per share, can i exercise the Jan'23 $80 Call and that means i buy BIDU shares for $80? and then the shares get called away at $230 - meaning i make a profit?

[@StockandOptionMyLifeOfLearning]

In theory, if I’m understanding what you described correctly, yes you could exercise your 80 LEAPS call and then allow it to be called way at the 210 short call’s strike. However there are a couple of things to consider. Your 80 LEAPS call probably has some time value left in it. If so, by exercising that call you are just giving that TV away. Also whereas the near term 210 short call will be automatically assigned if it’s ITM, since your LEAPS call expiration isn’t the same day, you would have to request early assignment in order for it to be assigned. As far as if it will be a profitable position, it comes down to how much cash you collected over the life of the position vs what you get when you liquidated it. Here is a video series that I believe will help explain some of what I mentioned and will offer some further insight into LEAPS and PMCCs: kzbin.info/aero/PL3j38I2YtGw3d2osU5O6XRHJ8-Wul2ZW7

[@Prosperousprotocols]

Love the shirt

[@StockandOptionMyLifeOfLearning]

Thank you

[@donnkim7267]

Buying a leap call with high delta and low theta and then selling near term low delta and high theta to pay for the long call premium. Very interesting but what happens after the 600 days when that long call expires? Do you just buy the assigned $80 shares?

[@StockandOptionMyLifeOfLearning]

Generally, I would not keep that LEAPS option the entire timeframe. As a general rule of thumb, once the next year's options, come out, if I want to stay in the position, I roll the option out 1 more year. For example, right now I'm beginning to look for opportunities to roll our long LEAPS 2024 options out to 2025.

[@ckn9413]

@@StockandOptionMyLifeOfLearning Hi Randy, great video. "I would not keep that LEAPS option the entire timeframe", meaning that you usually buy 2-year LEAP but roll it after 1 year if you want to stay in position? Such as you buy LEAP in 2022 for expiry in 2024, but you will roll it in year 2023 to expiry in year 2025? Do I understand correctly ??

[@StockandOptionMyLifeOfLearning]

Yes, exactly 👍

[@mcgragor1]

So on the long option you buy, I take it you have to sell it to close or roll it out or you'd lose all of your premium correct? If not please explain, thanks!

[@StockandOptionMyLifeOfLearning]

Yes that’s correct. If I want to stay in the position, I will roll it out once the next year’s LEAP options come out.

[@mcgragor1]

@@StockandOptionMyLifeOfLearning Okay great, once again you've been a great help! Glad I subscribed. One more thing, you said if you want to stay in. So I guess you could also sell to close the position if you wanted out correct?

[@StockandOptionMyLifeOfLearning]

Yes that's correct. 👍

[@waltermercado9152]

What would happen if your short call expires itm? How would the shares get exercised if you dont own any?

[@StockandOptionMyLifeOfLearning]

Hey Walter that's a great question and thank you for your support! SInce you don't own any shares (you own a DITM LEAP) you would be short 100 shares per contract and still long the DITM LEAP call that you bought. If you wanted to get back to where you started, you'd need to buy 100 shares (so you are back at 0 shares) and sell a new near term call option.

[@ImEddy92]

@@StockandOptionMyLifeOfLearning first off i love how you actually answer peoples questions in the comments! this is exactly what i was looking for. second, what if we are using a broker like robinhood who does not allow us to short a stock? at that point would our long term call be closed to balance our short term call? or would this broker not allow us to enter a poor mans covered call to begin with?

[@StockandOptionMyLifeOfLearning]

Thank you for that Ahmed and for your support! 😊 I do have a Robinhood account however I don't trade options in it. I only buy stock outright. So I don't feel like I can answerthosee questions with confidence. That's probably a question you'd have to contact them on. The three companies that I have traded options with our Trade Station, ETrade and Interactive brokers. All of them were solid companies that I would recommend although it's been 10 or 12 years since I had a Trade Station account so I can't speak to what kind of company they are currently. I'm currently using Interactive brokers and ETrade. If Robinhood isn't giving you what you want, then you might consider switching to a full service customer service oriented Broker like ETrade or another company like that if you're newer to option trading. If you've been at it for a while and don't need much customer service help, then a company like Interactive brokers might be a good fit for you.

[@khaldoonabdulmalik4184]

Can i sell short term call against my long LEAP if the strike price of short call is higher then the LEAP?

[@StockandOptionMyLifeOfLearning]

You should be able to do that. That's the very essence of a PMCC. It's really a matter of how your broker will look at it when it comes to them allowing your LEAPS to offset the near term short call.

[@aaron123lolle4]

@@StockandOptionMyLifeOfLearning can you explain more about this example spread: Call Tesla 900 12/22 15k Sell covered call 950 2/11 get 2k premium. At expi date Tesla 955 so what gonna happen? Lose leap call 15k ?or I take back 15k + 2k premium ? . Thanks for your video and your time.

[@StockandOptionMyLifeOfLearning]

At expiration the February 2022 call option that you sold will be in the money. So if you don't do anything about it, your broker will pull 100 shares times however many contacts you sold out of your account. As a result, you would still own your Tesla 900 12/22 call option but you'd be short 100 shares per contract. In order to avoid that, you would just buy that February call option back for five dollars. If you felt comfortable with it you could simultaneously sell a new one farther out in time and maybe at a higher strike price to help pay for buying back the February 950 call option. Here's a video I made on that exact subject if you'd like to check it out: kzbin.info/www/bejne/nWHWdpSEbZKZatE

[@aaron123lolle4]

@@StockandOptionMyLifeOfLearning Thank you so much

[@seanlow2033]

Do you close your short call option for a loss if it goes ITM?

[@codingchallenges]

You roll it for credit to the next expiration date, possibly also rolling to a higher strike, if the premium is right.

[@StockandOptionMyLifeOfLearning]

I couldn't have said it any better! Thank you both for your support!

[@seanlow2033]

@@codingchallenges I’m new to this - so rolling means you buy to close the initial position and then sell another put option at a lower strike price and a later expiry?

[@StockandOptionMyLifeOfLearning]

All that is correct except that you can also roll it up or just out with the same strike price.

[@KurtVogel88]

Do you need margin authorization from your brokerage to do PMCC?

[@StockandOptionMyLifeOfLearning]

I do not believe so, however, each broker makes that decision. So you’d want to check with yours.

[@johnbillingsley8412]

As the stock goes up, the near short call shows unrealized losses. How do you manage that situation?

[@StockandOptionMyLifeOfLearning]

Hey John thanks for the question and your support! It doesn't bother me if there's an unrealized loss as long as there's some time they left in the short option. In this case, this option is pretty far OTM so we are good if it switches over to an unrealized loss. One of the benefits of buying such a DITM LEAP call option is that the option we are long will go up in value faster than the one we sold. So if there happens to be an unrealized loss on the short option the gain in our long option will exceed that loss.

[@johnbillingsley8412]

@@StockandOptionMyLifeOfLearning Thanks for your reply. What are good criteria for gain targets or stop losses to exit the position? When should one or both legs be rolled, winning or losing? Thanks again.

[@StockandOptionMyLifeOfLearning]

If you're looking to get out pretty quick, then once the stock hits some resistance you might consider getting out. We like to be in these poor man covered calls for a long time. We generally do them in stocks that we intend to stay in for quite a while unless something fundamentally changes with the company. Therefore we do not have a stop loss. Our stop loss is really if something fundamental changes with the company. We don't mind the stock price going down as long as it's still a solid company. As far as rolling the covered call portion, here's a video I made on that subject if you'd like to check it out: kzbin.info/www/bejne/majSooVrm7N7oaM

[@ashokbaby]

@@StockandOptionMyLifeOfLearning I like the idea, but I wouldn't use such long leaps. Don't want to ignore the actual call risk.

[@StockandOptionMyLifeOfLearning]

Thank you for your feedback and support!

[@reinhartpaulo5741]

Hello bro, what if i open sell put position deep otm 500DTE , can i still get paid every mountly until 0 DTE. Thanks. I'm still newbie in option market 🙏

[@StockandOptionMyLifeOfLearning]

Thank you for your question and support! If I'm understanding your question correctly, you're describing a scenario in which you sell a put option that's OTM and has 500 days until it expires. In that scenario, you'd get paid upfront for selling that put option and theoretically, as long as the stock didn't come down in price, the value of that put you sold should slowly deteriorate until by day 500, it's worthless. In reality, the stock price will move around as will the value of the option you sold but as long as the stock's price doesn't go ITM, the value of that option will be $0 at day 500. In the scenario you described, since you sold a 500 DTE option not a 30 DTE option, you'd only get paid once every 500 days (unless you closed the position out early and sold a new option). That's why we prefer to sell 30-50 day options so we can get paid more often.

[@reinhartpaulo5741]

@@StockandOptionMyLifeOfLearning this is the best answer. Tnks broo 👍

[@romeoking3191]

DOES WEBULL ALLOWS PMCC ?

[@StockandOptionMyLifeOfLearning]

I don’t know if they do or not. You could always try one out and see if it takes it and what the margin requirement is or email customer service to find out.

[@marksoberay2318]

Caution do not sell the same number of calls as u have leaps...if it blows through your short you will get short shares....stay delta neutral...ie 9 leaps sell 9 calls no...9 leap x delta of leap, round down thats the calls u can safely sell

[@StockandOptionMyLifeOfLearning]

Hey Mark thank you for your insight and support! 👏 What you described is the exact reason we like to buy DITM (very close to 1 delta) calls to prevent the deltas from turning against us.

[@zombiedriver7442]

Just what I was looking for! I click like EVERYTIME!! thanks…

[@StockandOptionMyLifeOfLearning]

You're awesome! Thank you that! 😊

[@billestep6804]

Can you buy a call leap then run a strangles using the leap as collateral for the call side. Kind of like the pmcc on steroids?

[@StockandOptionMyLifeOfLearning]

Hey Billy, thank you for your question and support! Yes you can do that, however if I'm understanding your question correctly, you'd really need to watch your deltas because you'd be buying a LEAP and selling near term calls & puts. If the underlying stock/ETF moved towards you short strike, your deltas might be compromised unless the deltas of your long options are close to 1. I have traded that exact strategy before and it worked pretty good for us, it's just when the underlying moves against us, that's the weakness of using LEAPs in strangles if your deltas are close to 1.