Covered Call is one of the most popular options trading strategies and is often recommended to beginning traders.

But there is also Poor Man’s Covered Call – a strategy that ties up much less capital. Retail trader Dale Perryman from Texas allocates about half of his portfolio to this strategy.

In this video interview, he explains what Poor Man’s Covered Call is and how he trades the strategy.

Learn about Poor Man’s Covered Call in this video

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An experienced investor and trader

This is Covered Call

In the video, Dale explains both the Covered Call and the Poor Man’s Covered Call strategies in detail. Thus, we will only give a summary here.

A Covered Call has two elements:

First, you need to own shares of a stock or an ETF.

Secondly, you sell a short call out of the money.

Here is an example from OptionStrat using Apple shares. The trader bought 100 shares for 230.1 dollars each—or a total of 23 010 dollars. He then sold a call with a strike price of 245 that expires eight days later. For this, he received 96.5 dollars.

As long as the prices stay below 245 over the next 8 days, the trader keeps his premium and is free to sell a new covered call. If the price goes beyond 245, he will be assigned and have to sell his shares for 245 dollars. This puts a cap on his maximum profits. If this happens, he will have made 1,586.5 dollars in this example – 1490 dollars from the price appreciation plus the premium of 96.5 dollars he received. .

This is Poor Man’s Covered Call

With the Poor Man’s Covered Call strategy, you no longer own the shares. Instead, you buy a longer-term deep in the money call on the underlying, often referred to as a LEAP. The deeper the long call is in the money, the more it will act like owning the shares.

Dale usually buys a 70 delta call about half a year out. Other traders recommend using even higher deltas to make the long call act as close to owning the shares as possible.

This strategy is particularly attractive to traders who don’t have the capital to purchase large quantities of stock. The “poor man” in the strategy’s name refers to the fact that it allows traders to engage in the same type of strategy for far less upfront investment. Instead of tying up significant funds in owning stock, you only need a fraction of the amount to control the same number of shares through options.

Why Dale uses the Poor Man’s Covered Call

Dale explains that a large part of his portfolio (around 50%) is devoted to Poor Man’s Covered Calls because it allows him to take advantage of market movements while keeping his capital available for other trades. He compares the strategy to real estate, where you’re “getting paid to wait” for the value to appreciate. In options, this comes from collecting premiums while still benefiting from the stock’s movement through the long call.

He also mentions that diversification is a significant benefit of using Poor Man’s Covered Call. By requiring less capital per trade, you can spread your investments across multiple stocks, reducing the risk of any single trade going against you. Rather than putting all your money into one stock, you can invest in a basket of different companies, from tech giants like Microsoft and Apple to energy stocks like Chevron or ExxonMobil.

Dale’s strategies

Dale explains that he splits his portfolio into several strategies with different risk profiles and underlying. The Poor Man’s Covered Call is a basis, but the biggest profits have so far come from his much more volatile 0DTE Iron Fly strategy. We will explain this particular strategy in a later video with Dale Perryman.

Where to learn more from Dale Perryman

You can connect to Dale Perryman on his YouTube channel or trading website TradeDiff.