EXAMPLE
PMCC
Illustrative example
- Underlying
- $100.00
- Net entry debit
- $3,071.30 including entry fees
- Breakeven
- $99.22
- Max profit
- Not fixed
- Max loss
- Not fixed
- Evaluated at
- 2026-10-16
Premium strategy tool
Poor Man's Covered Call & PMCC Screener
A poor man's covered call replaces 100 shares with a long-dated, typically deep in-the-money call, and sells a shorter-dated call against it. It uses less capital than owning shares, but it is a diagonal with different expirations and different risks.
The PMCC finder compares candidate pairs by net debit, remaining extrinsic value in the long call and the cushion between the strikes.
Product preview
The chart below is the same payoff component used inside the platform, run on the hypothetical example described later on this page.
PMCC
A long-dated call stands in for shares and a nearer call is sold against it. Two expirations, so the curve is modeled.
Illustrative example
- Buy$70 call, Oct 2027
- Sell$105 call, Oct 2026
Profit zoneLoss zoneStock priceBreakeven
- Example stock
- $100.00
- Net entry debit
- $3,071.30 including entry fees
- Breakeven (modeled)
- $99.22
- Max profit
- Not fixed
- Max loss
- Not fixed
- Evaluated at
- Short expiry
Different expirations: the long call remains open until 2027-10-15. This is not a fixed expiration payoff or a guaranteed outcome.
Payoff scenario
Illustrative example, read-only. Hypothetical inputs run through TradingSignalAI's payoff model.
Illustrative example
- Hypothetical underlying
- $100.00
- Net entry debit
- $3,071.30 including entry fees
- Position · standard 100-share contracts
- Buy $70 call (2027-10-15) · sell $105 call (2026-10-16)
PMCC modeled scenario (modeled)
1 long call + 1 short call · at short-call expiration · expires 2026-10-16
Hover, touch, or focus the chart and use arrow keys to read P/L at a price.
- Shaded above $0: profit
- Shaded below $0: loss
- Solid line: P/L at short-call expiration (modeled)
- Dashed line: reference price
- Circle: break-even
- Dotted line: strike (values below)
- Modeled break-even
- $99.22
- Strikes
- $70.00, $105.00
- Modeled profit cap
- Scenario-dependent
- Max loss
- Scenario-dependent
The chart shows underlying prices from $50.75 to $124.25 only. Losses or gains outside this window can be larger; the window's lowest and highest points are not maximum risk. Maximum values are scenario-dependent, not unlimited or guaranteed.
Different expirations: the long call remains open until 2027-10-15. This is not a fixed expiration payoff or a guaranteed outcome.
Long-call value modeled with unchanged 30.0% IV, 0% interest and 0% dividend yield (European Black–Scholes approximation).
Subtracts the signal net debit including entry fees. Future volatility, dividends, American exercise, assignment exposure, exit fees and taxes can change results.
Move the pointer or focus the chart and use the left and right arrow keys to read profit or loss at each stock price. These are not live quotes or signals.
PMCC: two contracts, two expirations
Hypothetical example. Not a quote or a result. Evaluated at short-call expiration. The long call still has time value then, so this is a modeled scenario, not a fixed cap or guaranteed result.
Illustrative example
Buy
Long-dated deep in-the-money call- Strike
- $70
- Expiration
- 2027-10-15
- IV (stated model input)
- 30%
- Delta
- Not an input here
- Capital required
- $3,071.30 net debit
Sell
Short-dated out-of-the-money call- Strike
- $105
- Expiration
- 2026-10-16
- Premium
- Reduces the net debit
- Stock reference
- $100.00
Long-call delta and IV on a real signal come from the quotes shown at the time. Here, only the 30% IV is a stated input to the model, with 0% interest and dividends, unchanged volatility, and no delta inference. The short call is the only leg that expires first.
Below the short strike
Stock $99.75
$48.26 P/L
The short call expires unused. The long call keeps its value, and the net debit is still at risk.
At the short strike
Stock $105.00
$532.16 P/L
Short call has no intrinsic value. The long call is modeled with remaining time value.
Above the short strike
Stock $110.25
$502.42 P/L
The short call costs you above $105, offset by the long call's gain. Not a fixed cap.
Metrics in pictures
Days to expiration
How the time horizon changes what you are comparing.
Illustrative example
0 DTE
Expiration day. Value is almost all intrinsic, and assignment can happen quickly.
7 DTE
Weekly. Time value is small and shrinks fast, and returns per day look large.
30 DTE
Monthly. A common window for comparing premium against time at risk.
45 DTE
Slower daily decay, more time for the stock to move against a position.
90 DTE
Quarterly. Premiums are larger in dollars but spread across more days.
365+ DTE
LEAPS range. Mostly time value early on, and used for long exposure, not quick income.
Descriptions are general tendencies. The scanner normalizes returns per day so different expirations can be viewed together.
Delta: directional exposure
Select a delta to see what it means for one call contract.
Illustrative example
Out of the money, delta 0.30
Moderate sensitivity. Sold options here collect more premium than at 0.15 and are more likely to finish in the money.
One standard contract has about 30 shares of price exposure: roughly $30.00 per small $1 stock move, or $0.30 per quoted share, with other inputs held constant.
Delta is a model sensitivity, not a probability forecast. Values shown are examples, not quotes.
How the poor man's covered call (pmcc) tool works
- The finder searches for long calls with substantial delta and a shorter-dated call at a higher strike.
- It requires the long call to expire after the short call, and screens both legs for liquidity.
- Each pair shows gross debit, entry fees, net debit, strike width, long-call intrinsic and extrinsic value and warnings.
- The payoff view is a modeled scenario at the short call's expiration. It values the remaining long call with a Black-Scholes approximation, or intrinsic value only if implied volatility is missing.
Metrics you will see
| Metric | Meaning |
|---|---|
| Net debit | Long-call cost minus short-call premium plus entry fees. |
| Strike width | Short strike minus long strike, times 100. |
| Extrinsic value | The long call's price above intrinsic value. It decays and can be lost. |
| Assignment cushion | Distance between the stock and the short strike. |
| Weekly income yield | Short-call premium relative to debit. Future sales are not guaranteed. |
Worked example: capital compared with shares
Stock at $100. Buy a one-year $70 call at $31.80 and sell a 13-day $105 call at $1.10. Fees $1.30.
| Item | Calculation |
|---|---|
| Gross debit | ($31.80 - $1.10) x 100 = $3,070 |
| Net debit with fees | $3,071.30 |
| Capital versus 100 shares | $3,070 / $10,000 = about 31% |
| Long-call intrinsic value | $100 - $70 = $30.00, so $1.80 of the $31.80 is extrinsic |
| Strike width | ($105 - $70) x 100 = $3,500, above the debit |
The chart is a modeled curve using an assumed 30% implied volatility held constant, and it is not a fixed expiration payoff. There is no guaranteed maximum profit.
Risks to understand
- The long call can lose most or all of its value if the stock falls substantially.
- If the short call is assigned early, exercising the long call to cover can forfeit its remaining extrinsic value.
- Dividends, volatility changes and American-style exercise can move results away from the model.
- Selling new short calls later is not guaranteed to produce income, and a rally above the short strike can cap gains.
Access
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Eligible new customers can begin a 7-day Premium trial. A payment method is required, and the selected plan bills automatically at the end of the trial unless canceled. Registration alone is not a Premium subscription.
Frequently asked questions
Learn more
- PMCC Strategy: Long Calls, Short Calls & RiskUnderstand poor man's covered calls, long-call time value, short-call assignment and diagonal payoff modeling. Future call-sale income is not guaranteed.
- Extrinsic Value: Time Value in OptionsCalculate an option's extrinsic value and understand time decay, volatility and why exercising a long-dated call can forfeit remaining time value.
- Intrinsic Value: Calls, Puts & MoneynessCalculate call and put intrinsic value with simple formulas and examples. Distinguish immediate exercise value from the option's quoted market premium.
- Options Assignment: Share Delivery & RiskUnderstand exercise, early assignment, share delivery and expiration risk. Learn why covered positions and defined-risk spreads still need active review.
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Research the trade before you place it
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