{"id":7854,"date":"2022-05-19T19:58:53","date_gmt":"2022-05-19T11:58:53","guid":{"rendered":"https:\/\/slashtraders.com\/?p=7854"},"modified":"2025-09-29T17:40:25","modified_gmt":"2025-09-29T09:40:25","slug":"poor-mans-covered-call","status":"publish","type":"post","link":"https:\/\/www.slashtraders.com\/en\/blog\/poor-mans-covered-call\/","title":{"rendered":"Poor Man's Covered Call: Same Income, Half the Capital"},"content":{"rendered":"<p class=\"wp-block-paragraph\">Covered Call is a popular way to improve returns on long term investments. But selling Covered Calls requires a lot of buying power to execute, so there's something called a Poor Man's Covered Call strategy to help you make similar returns using less capital investment.<\/p>\n\n\n\n<p class=\"wp-block-paragraph translation-block\">Today SlashTraders will show you how to execute <a href=\"https:\/\/slashtraders.com\/en\/blog\/sell-covered-call\/\" target=\"_blank\" rel=\"noreferrer noopener\">Covered Calls<\/a> with less buying power.<\/p>\n\n\n<\/p>\n\n\n\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<span class=\"wwGH5RFj8cEmuEK94hXpNU7DvdBeqiQBVtCfL8NZWMGKIYnsPiObxlr61TgP52xZkDzFU0lJXqAMSr\"><iframe title=\"Use Poor Man&#039;s Covered Call to Earn Higher Returns With Less Money Down\" width=\"500\" height=\"281\" src=\"https:\/\/www.youtube.com\/embed\/ujEDI7g98Ag?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><\/span>\n<\/div><\/figure>\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What Is a Covered Call?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph translation-block\">A common Covered Call works by holding 100 stocks while <a href=\"https:\/\/slashtraders.com\/en\/blog\/naked-call\/\" target=\"_blank\" rel=\"noreferrer noopener\">selling an OTM Call option<\/a> that expires next month to increase the returns on the buy and hold strategy.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">When we invest in BABA with the Covered Call options strategy, the trade uses $8,495 in buying power:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Buy 100 stocks.<\/li>\n\n\n\n<li>Sell a 0.20 delta OTM Call option at $110 that expires next month.<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-image aligncenter size-large\"><img fetchpriority=\"high\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/slashtraders.com\/wp-content\/uploads\/2022\/05\/baba-covered-call.png\" alt=\"baba covered call\" class=\"wp-image-7858\" srcset=\"\" sizes=\"(max-width: 1024px) 100vw, 1024px\" data-srcset=\"\" \/><figcaption class=\"wp-element-caption\">A BABA Covered Call costs $8,595 in buying power.<\/figcaption><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">The trade can earn the short Call premium of $231 if the stock price doesn't rise beyond $110 before expiration. If the stock price rises beyond $110, the maximum profit on the Covered Call is $2,405.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If we don't want to spend so much cash on a single trade, we can use the Poor Man's Covered Call to achieve a similar result.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What Is a Poor Man\u2019s Covered Call?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph translation-block\">Poor Man's Covered Call is an <a href=\"https:\/\/slashtraders.com\/en\/blog\/beginner-options-trading-strategies\/\" target=\"_blank\" rel=\"noreferrer noopener\">options strategy<\/a> that combines a <a href=\"https:\/\/slashtraders.com\/en\/blog\/best-leaps-call-options\/\" target=\"_blank\" rel=\"noreferrer noopener\">long deep ITM long-term Call<\/a> and a short OTM Call option.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A Poor Man's Covered Call on BABA uses only $3,825 in buying power, less than half of the Covered Call:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>A 0.90 delta long Call at $50 that expires 5 months later.<\/li>\n\n\n\n<li>A short 0.20 delta OTM Call at $110 that expires next month.<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-image aligncenter size-large\"><img decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/slashtraders.com\/wp-content\/uploads\/2022\/05\/baba-poor-mans-covered-call.png\" alt=\"baba poor man&#039;s covered call\" class=\"wp-image-7859\" srcset=\"\" sizes=\"(max-width: 1024px) 100vw, 1024px\" data-srcset=\"\" \/><figcaption class=\"wp-element-caption\">A BABA Poor Man's Covered Call only costs $3,825 in buying power.<\/figcaption><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">If the stock prices doesn't rise beyond $110 before expiration, we profit $231 from the short Call premium. If the stock price goes up beyond $110, the maximum profit from the Poor Man's Covered Call is $2,175.<\/p>\n\n\n\n<p class=\"wp-block-paragraph translation-block\">However, if the stock price drops below $50 within 5 months, the <a href=\"https:\/\/slashtraders.com\/en\/blog\/options-value\/\" target=\"_blank\" rel=\"noreferrer noopener\">value of the options strategy becomes worthless<\/a>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Differences Between Poor Man\u2019s Covered Call and a Normal Covered Call<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The advantage of a Poor Man's Covered Call is to earn similar profits with less capital investment.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">From the BABA example we showed earlier, the Poor Man's Covered Call uses less than half of the buying power to earn the same short Call premium.<\/p>\n\n\n\n<table id=\"tablepress-38\" class=\"tablepress tablepress-id-38\">\n<thead>\n<tr class=\"row-1\">\n\t<th class=\"column-1\">Strategies<\/th><th class=\"column-2\">Buying power<\/th><th class=\"column-3\">Short Call premium (%)<\/th><th class=\"column-4\">Maximum profit (%)<\/th>\n<\/tr>\n<\/thead>\n<tbody class=\"row-striping row-hover\">\n<tr class=\"row-2\">\n\t<td class=\"column-1\">Covered Call<\/td><td class=\"column-2\">$8,595<\/td><td class=\"column-3\">$231 (2.7%)<\/td><td class=\"column-4\">$2,405 (28%)<\/td>\n<\/tr>\n<tr class=\"row-3\">\n\t<td class=\"column-1\">Poor Man's Covered Call<\/td><td class=\"column-2\">$3,825<\/td><td class=\"column-3\">$231 (6.0%)<\/td><td class=\"column-4\">$2,175 (57%)<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<!-- #tablepress-38 from cache -->\n\n\n\n<p class=\"wp-block-paragraph\">If the stock price shoots up, the Poor Man's Covered Call gives us a higher Return on Capital.<\/p>\n\n\n\n<p class=\"wp-block-paragraph translation-block\">But if the stock price falls unexpectedly, the <a href=\"https:\/\/slashtraders.com\/en\/blog\/sp500-spy-etf-wheel-strategy\/\" target=\"_blank\" rel=\"noreferrer noopener\">Covered Call trader can patiently wait for the stock to rebound in the future<\/a>. On the other hand, the Poor Man's Covered Call trade needs to close before the options expire, giving us less time to respond when the market goes down.<\/p>\n\n\n\n<figure class=\"wp-block-image aligncenter size-full\"><a href=\"https:\/\/www.slashtraders.com\/en\/pricing\/?utm_source=blog&amp;utm_medium=banner\" target=\"_blank\" rel=\"noopener\"><img decoding=\"async\" width=\"971\" height=\"120\" src=\"https:\/\/slashtraders.com\/wp-content\/uploads\/2022\/03\/slashtraders-trial-banner.png\" alt=\"slashtraders trial banner\" class=\"wp-image-7387\" srcset=\"\" sizes=\"(max-width: 971px) 100vw, 971px\" data-srcset=\"\" \/><\/a><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">How to Find the Best Poor Man\u2019s Covered Calls to Enter<\/h2>\n\n\n\n<p class=\"wp-block-paragraph translation-block\">We choose Poor Man's Covered Call opportunities like we do with the popular version, by finding <a href=\"https:\/\/slashtraders.com\/en\/blog\/best-blue-chip-stocks-dividends\/\" target=\"_blank\" rel=\"noreferrer noopener\">blue-chip stocks<\/a> that we want to <a href=\"https:\/\/realworldinvestor.com\/\" target=\"_blank\" rel=\"noreferrer noopener\">invest in long term<\/a>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph translation-block\">The <a href=\"https:\/\/slashtraders.com\/en\/tools\/best-value-stocks\/\" target=\"_blank\" rel=\"noreferrer noopener\">Bullish Value Stocks<\/a> list shows us undervalued, blue-chip stocks that have a high probability of going up.<\/p>\n\n\n\n<p class=\"wp-block-paragraph translation-block\">We can see PayPal is heavily undervalued right now.\nCompared to <a href=\"https:\/\/slashtraders.com\/en\/blog\/fundamental-analysis-vs-technical-analysis\/\" target=\"_blank\" rel=\"noreferrer noopener\">Fair Value from the fundamental analysis<\/a>, there is 123% of potential Upside.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The technical analysis also tells us PYPL has a bullish signal 1 trading day ago, shown by the Long Signal Days of 1.<\/p>\n\n\n\n<figure class=\"wp-block-image aligncenter size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"611\" src=\"https:\/\/slashtraders.com\/wp-content\/uploads\/2022\/05\/best-value-stocks.png\" alt=\"best value stocks\" class=\"wp-image-7870\" srcset=\"\" sizes=\"(max-width: 1024px) 100vw, 1024px\" data-srcset=\"\" \/><figcaption class=\"wp-element-caption\">Both fundamental and technical analyses provide a bullish outlook for PYPL.<\/figcaption><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">A Poor Man's Covered Call on PYPL costs $3,430 in buying power:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Buy a 0.90 delta ITM Call option at $45 that expires 5 months later.<\/li>\n\n\n\n<li>Sell a 0.20 delta Call option at $95 that expires next month.<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-image aligncenter size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/slashtraders.com\/wp-content\/uploads\/2022\/05\/pypl-poor-mans-covered-call.png\" alt=\"pypl poor man&#039;s covered call\" class=\"wp-image-7874\" srcset=\"\" sizes=\"(max-width: 1024px) 100vw, 1024px\" data-srcset=\"\" \/><figcaption class=\"wp-element-caption\">A PYPL Poor Man's Covered Call has a maximum return of 46%.<\/figcaption><\/figure>\n\n\n\n<p class=\"wp-block-paragraph\">We can make $133 from the short Call premium if the stock prices doesn't reach $95 by next month. If the stock prices goes beyond $95, the maximum profit from the trade is $1,570.<\/p>\n\n\n\n<p class=\"has-ast-global-color-4-background-color has-background wp-block-paragraph\"><a href=\"https:\/\/www.slashtraders.com\/en\/blog\/slashtraders-vs-sp500\/\" target=\"_blank\" rel=\"noreferrer noopener\">SlashTraders vs S&amp;P 500: 450% Outperformance, Verified Trades and How to Copy Every Alert<\/a><\/p>","protected":false},"excerpt":{"rendered":"<p>If your account is too small to buy 100 shares, you can trade Poor Man's Covered Calls to use less buying power for the same Covered Call returns.<\/p>","protected":false},"author":1,"featured_media":7855,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"plain-container","ast-site-content-layout":"normal-width-container","site-content-style":"unboxed","site-sidebar-style":"unboxed","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"default","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"set","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":"","_wp_rev_ctl_limit":"5"},"categories":[3],"tags":[35,56,12,64,14,49,11],"class_list":["post-7854","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","tag-baba","tag-cn","tag-en","tag-es","tag-options","tag-pypl","tag-tw"],"_links":{"self":[{"href":"https:\/\/www.slashtraders.com\/en\/wp-json\/wp\/v2\/posts\/7854","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.slashtraders.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.slashtraders.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.slashtraders.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.slashtraders.com\/en\/wp-json\/wp\/v2\/comments?post=7854"}],"version-history":[{"count":5,"href":"https:\/\/www.slashtraders.com\/en\/wp-json\/wp\/v2\/posts\/7854\/revisions"}],"predecessor-version":[{"id":13934,"href":"https:\/\/www.slashtraders.com\/en\/wp-json\/wp\/v2\/posts\/7854\/revisions\/13934"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.slashtraders.com\/en\/wp-json\/wp\/v2\/media\/7855"}],"wp:attachment":[{"href":"https:\/\/www.slashtraders.com\/en\/wp-json\/wp\/v2\/media?parent=7854"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.slashtraders.com\/en\/wp-json\/wp\/v2\/categories?post=7854"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.slashtraders.com\/en\/wp-json\/wp\/v2\/tags?post=7854"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}