Buy Leap Sell - Covered Call

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The primary advantage of this strategy is leverage. Purchasing 100 shares of a high-priced technology stock like NVIDIA or Microsoft can require tens of thousands of dollars in capital. A LEAPS contract, however, might cost only 20% to 30% of the price of the actual shares while providing nearly identical exposure to upward price movements. This increased capital efficiency significantly boosts the potential return on capital (ROC). If the underlying stock remains stable or rises modestly, the monthly income from selling covered calls can eventually pay for the entire cost of the LEAPS, leaving the investor with a "free" long-term bullish bet. buy leap sell covered call

Time decay, or theta, also plays a dual role in this strategy. The short-term call benefits from rapid theta decay, which works in the trader's favor. Conversely, the LEAPS position also loses value over time, though at a much slower rate. The success of the PMCC depends on the "theta spread"—the difference between the daily decay of the short call and the long call. As long as the short call decays faster than the LEAPS, the trader captures a net positive time value. AI responses may include mistakes