Covered Calls vs Poor Man’s Covered Calls on SPY and QQQ

By Charlie Nguyen · Published Nov 3, 2026 · Option data as of the Nov 2, 2026 close · 9 min read

A covered call and a poor man’s covered call (PMCC) both get paid to sell upside. The difference is what sits underneath: 100 shares, or one long-dated call. Here’s how they compare on SPY and QQQ on capital, delta, breakeven, risk, assignment and dividends, using real option chains from the Nov 2, 2026 close.

Covered call vs PMCC in one minute

• Covered call: own 100 shares, sell a call above the price. You collect premium and dividends and give up gains above the strike.
• Poor man’s covered call: buy a deep in-the-money LEAPS call (about 0.80 delta, a year or more out) instead of the shares, then sell the same short-dated calls against it. Technically it’s a long call diagonal spread.

Same income engine, different fuel. The PMCC uses far less capital, so the same premium is a bigger percentage return, and the same drop is a bigger percentage loss.

Capital needed: SPY and QQQ side by side

On SPY, the PMCC needed about 81% less capital ($13,916 vs $75,210); on QQQ about 78% less. The same short call paid 0.83% of the capital on SPY shares but 4.48% on the PMCC. That leverage is the whole appeal, and the whole risk.

The short call: POP, POT and P50

For both examples I used the ~0.30-delta call about a month out from the tracker’s strike ladder, with probabilities from the tracker’s model. These are examples, not recommendations:

POP is the model chance the call expires worthless, POT the chance the price touches the strike first, and P50 the chance of buying it back at half the credit (POP vs POT vs P50 explained). The odds on the short call are identical whichever long leg is underneath; what differs is what happens to the long leg.

For context, on Nov 2, 2026 the tracker’s own read was “modest otm” for SPY (suggesting the 769 strike) and “wait” for QQQ, which was 10.3% below its high. It doesn’t suggest selling calls into a broken trend, which is worth respecting with either structure.

Delta, risk and what a drop does

100 shares have a delta of 1.00 per share; the LEAPS had 0.80 (SPY) and 0.80 (QQQ), so a PMCC moves a bit less per dollar. Measured against the money put in, though, the PMCC is far more sensitive. Model example (Black-Scholes at each leg’s own implied volatility, IV unchanged, result as % of the money at risk):

On a 10% drop, the SPY covered call lost about 9% of its capital; the PMCC lost about 39%. Flat, the PMCC earned more per dollar. A big rally caps both; the PMCC’s LEAPS keeps some extrinsic value but the short call’s loss grows dollar for dollar. Breakevens at the short expiry were close ($745.87 vs about $748.81 on SPY), but the PMCC’s depends on volatility and time.

The rule I follow (more in my bankroll article): size a PMCC as if the LEAPS could lose most of its value, not as if it were 100 shares.

Choosing the LEAPS

• Delta around 0.75–0.85. The SPY Dec 17, 2027 665 call had 0.80 delta and the QQQ 585 call 0.80.
• A year or more out. Both were 410 days out. SPY and QQQ list LEAPS expirations into 2029, so you can go longer.
• Know the extrinsic you’re paying. The SPY LEAPS cost $139.16: $87.10 intrinsic and $52.05 extrinsic (37% of the price), about 6.2% of SPY’s price per year. QQQ’s: $56.41 extrinsic (37%). That time value must be earned back by the short calls.
• Mind the spread. LEAPS are wider: the SPY one was $136.81 × $141.50, QQQ’s $150.00 × $155.00. Use limit orders at or near the mid.
• Buy when IV is lower. A LEAPS is mostly a volatility purchase; the tracker shows IV rank next to every quote (what IV rank means).

Assignment, dividends and early exercise

• American-style. SPY and QQQ options are American-style and settle in shares, so a short call can be assigned any day.
• Dividends. SPY and QQQ pay quarterly dividends to shareholders. Covered call writers collect them; PMCC holders don’t, since a call isn’t a share.
• Ex-dividend risk. An in-the-money short call whose remaining time value is less than the upcoming dividend is a prime early-exercise candidate the day before the ex-dividend date.
• Assigned on a PMCC? You’re short 100 shares. Buy the shares back (or exercise the LEAPS, which throws away its extrinsic value). Better: roll the short call before it’s deep in the money.
• Covered call assigned? Your shares are sold at the strike. That’s the planned outcome, but it can trigger a taxable gain.

Which one I use, and when

1. Already own the shares? Covered call. You keep dividends and avoid LEAPS decay.
2. Want the income without tying up a full position? PMCC, sized for the LEAPS to fall hard.
3. Trend broken or IV rank very low? I sell fewer calls or none, as the tracker’s read on QQQ suggested here.
4. Index ETFs first. SPY and QQQ have the tightest option markets, which is why I trade indexes over single stocks. The same playbook works on IBIT, with more volatility.

Track both in the free tracker

The Covered Call & PMCC Tracker does the work for SPY, QQQ, IBIT and SPX: today’s trend read, suggested strikes for the week and about a month out, POP, POT, P50 and IV rank, plus a ledger for your covered calls and PMCCs that stays in your browser and exports to Excel. For put-side income, see the SPX Desk, and check strikes against the expected move.

Sources and method. Short calls: ETFap’s Covered Call & PMCC Tracker data and engine at the Nov 2, 2026 close (Cboe delayed quotes, bid/ask mids; 13-week US T-bill yield (^IRX) 3.98%). POP, POT and P50 are model estimates (Black-Scholes at each option’s own implied volatility; Monte Carlo for P50). LEAPS: Cboe delayed option chains for SPY and QQQ (cdn.cboe.com/api/global/delayed_quotes/options/), Nov 2, 2026 close; delta as published by Cboe, intrinsic = price − strike. Scenario table: model example only, Black-Scholes value of the LEAPS at the short call’s expiry at an unchanged implied volatility; real results depend on volatility changes, fills and costs. Premium and loss percentages are per position, before commissions.

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