Adjustment Poor Man’s Covered Call

Adjustment Poor Man’s Covered Call

Introduction to Poor Man’s Covered Call Adjustments

In this course, we will explore various adjustment strategies for the Poor Man’s Covered Call (PMCC). This advanced course is designed to equip you with the knowledge and skills needed to effectively manage and optimize your PMCC positions in response to changing market conditions. We will use Amazon stock as our demonstration asset throughout this course.

Link to Start This Course: Start the Poor Man’s Covered Call Adjustments Course

Course Overview

A Poor Man’s Covered Call is a strategy involving a long-term deep in-the-money call option (acting as a surrogate for holding the stock) and a short-term call option sold against it. This strategy offers a cost-effective way to gain exposure to a stock’s movements while collecting premium from the short call. However, market conditions can change, and it’s crucial to know how to adjust your PMCC to maximize profit and minimize risk.

Seven Adjustments for Poor Man’s Covered Call

1. Rolling Up the Short Call

   • When the stock price increases significantly, you can roll up the short call to a higher strike price. This adjustment allows you to collect additional premium and gives more room for the stock to move upward, enhancing your profit potential.

2. Rolling Down the Short Call

   • If the stock price drops, rolling down the short call to a lower strike price can help you collect more premium and manage your position more effectively. This adjustment is beneficial if you anticipate the stock price will remain lower for an extended period.

3. Adding Protective Puts

   • To hedge against significant downside risk, you can add a protective put to your PMCC. This adjustment provides a safety net, limiting your losses if the stock price falls sharply while maintaining the potential for upside gains.

4. Converting to a Diagonal Spread

   • By adjusting the expiration dates of your long and short calls, you can create a diagonal spread. This adjustment can help manage time decay more effectively and take advantage of different expiration periods, potentially increasing your profitability.

5. Converting to a Calendar Spread

   • If you expect minimal stock price movement, converting your PMCC to a calendar spread (where both options have the same strike price but different expiration dates) can help you capitalize on time decay and volatility changes.

6. Adding a Short Put (Synthetic Covered Call)

   • To increase premium collection, you can add a short put to your PMCC, creating a synthetic covered call. This adjustment works well if you are bullish on the stock and want to maximize your premium income.

7. Rolling Both Legs Simultaneously

   • In some cases, you might want to roll both the long-term and short-term options simultaneously to new strike prices and expiration dates. This comprehensive adjustment can help you reset your position in line with your updated market outlook and risk tolerance.

Summary

Adjusting a Poor Man’s Covered Call is a vital skill for any options trader. By mastering these adjustments, you can adapt to changing market conditions, optimize your positions, and enhance your trading performance. This course will provide you with practical knowledge and strategies to manage your PMCC positions effectively.

Link to Start This Course: Start the Poor Man’s Covered Call Adjustments Course