📚 Educational Corner: The Ratio Poor Man’s Covered Call: Using Multiple LEAPS for Smarter Options Income

Most traders think of the Poor Man’s Covered Call (PMCC) as a one-to-one strategy. You buy one deep in-the-money LEAPS call, then you sell one short-term out-of-the-money call against it. Clean, simple, efficient.

But here’s the thing, options strategies don’t have to be static formulas. What if you held two LEAPS for every short call you sold? Or what if you decided to only sell calls against a fraction of your LEAPS position? That small adjustment turns the PMCC into something much more flexible: a tool you can shape around your market outlook instead of one that boxes you in.

That’s what we’ll explore here: the ratio PMCC. It’s not about reinventing the wheel, it’s about tilting it, ever so slightly, so the strategy fits your portfolio better.

The Standard Poor Man’s Covered Call, Refresher

Let’s start from the top. A traditional PMCC looks like this:

• Step 1: Buy a long-dated, deep in-the-money LEAPS call. This gives you stock-like exposure but at a fraction of the cost of 100 shares.

• Step 2: Sell a shorter-term out-of-the-money call. This brings in premium income, just like a covered call would if you owned shares.

It’s capital efficient, and it’s one of the best ways to generate options income when you don’t want to tie up large amounts of cash.

But like any strategy, the devil’s in the details. A textbook PMCC assumes you want income first and growth second. What if your priorities are reversed?

Ratio PMCC: The Concept

Instead of matching each LEAPS with a short call, you tilt the balance. For example:

• Two LEAPS, one short call → You lean bullish. You’ll capture more upside if the stock trends higher, while still collecting some premium income.

• Two LEAPS, two short calls → That’s closer to the classic PMCC but with a larger footprint. You’re essentially doubling down on income.

• One LEAPS, zero short calls → You’ve stopped writing calls altogether for a cycle. This is the bullish of all scenarios. It’s all the approach with the greatest risk.

The idea is simple: by adjusting the ratio, you adjust the trade-off between income and growth.

Why Bother with a Fractional PMCC?

The answer is flexibility. Income strategies can become suffocating if you force them in every market environment. By playing with ratios, you build a release valve.

Think about it this way:

• When markets are grinding higher with steady momentum, selling calls against all your LEAPS caps too much upside. Owning two LEAPS and selling one call lets you participate more fully in the trend.

• When markets are flat and volatility is low, the textbook 1-to-1 PMCC still works. You’re primarily collecting premium.

• When volatility is unpredictable, selling fewer calls cushions you from whipsaws while keeping you in the game.

It’s not about squeezing every penny of premium out of a position, it’s about tailoring your structure so it aligns with market reality.

A Practical Example: QQQ

Let’s put numbers to this.

• Underlying: QQQ at $450

• LEAPS Leg: Buy two Jan 2027 $350 calls for around $120 each

• Short Call: Sell one Oct 2025 $470 call for $8.10

Here’s the outcome:

• You’ve created long delta exposure with the two LEAPS. Each contract moves almost like stock, so you’ve got the equivalent of ~200 shares of QQQ exposure.

• By only selling one call, you’re not smothering that bullish position. You’re still pulling in $810 of premium income per contract, but you’ve left most of your upside intact.

Compare that to a strict 1-to-1 PMCC: your income is the same per short call, but your growth potential is muted because every LEAPS is capped.

The Risk-Reward Trade-Off

Like any adjustment, this comes with trade-offs.

• More LEAPS than calls = more capital tied up, more exposure to downside risk if the stock falls.

• Fewer calls sold = less premium collected, which means slower income in quiet markets.

• Upside capture = much better, but remember, stocks don’t trend forever.

This is where experience, and honesty, matter. If you’re using a ratio PMCC, you have to be comfortable carrying more directional risk. It’s still a defined-risk trade, but you’ve tilted the odds away from steady income and toward long-delta growth.

When a Ratio PMCC Makes the Most Sense

Timing matters. Ratio PMCCs tend to work best in environments like:

• Bullish trends - You want to keep more upside open while still pulling in premium.

• Moderate volatility - Premiums are decent, but not juicy enough to make selling against every LEAPS worthwhile.

• Portfolio balancing - If your other trades are heavily income-focused (Wheel strategy, credit spreads), a ratio PMCC adds bullish fuel.

Think of it less as a standalone bet, more as a portfolio layer.

Lessons from the Field

Here’s the honest truth: most traders blow up PMCCs not because of the strategy itself, but because of overconfidence. They sell too many calls, too aggressively, and then panic when the stock rips through their short strike.

On the other end, I’ve seen traders who never sell calls because they’re terrified of capping gains. What’s the result? A position that looks like an expensive LEAPS play, but without the steady income that makes PMCCs attractive in the first place.

The ratio approach is a middle path. Sell against some of your exposure, not all of it. Protect mental capital while still letting your winners run.

Portfolio Integration: Where It Fits

No strategy should live in isolation. A ratio PMCC pairs well with:

• Wheel trades (cash-secured puts and covered calls): for steady premium.

• Iron condors or credit spreads: for volatility harvesting.

• Traditional 1-to-1 PMCCs: to balance the more directional version.

Think of it as building a layered portfolio. Each trade has its role: some for consistency, some for growth, some for hedging. The fractional PMCC sits neatly between growth and income, it doesn’t have to be one or the other.

Final Takeaways

The Poor Man’s Covered Call is one of the most flexible, underappreciated strategies in options trading. And it’s even more flexible than most traders realize. By adjusting the ratio of LEAPS to short calls, you can tilt the strategy toward your market outlook instead of forcing it into a one-size-fits-all box.

• Two LEAPS, one short call = bullish with income.

• One LEAPS, one short call = steady income, defined risk.

• Sometimes, no short call at all = patience, optionality, mental breathing room.

The point isn’t to maximize every nickel of premium, it’s to build structures that keep your portfolio aligned with your goals.

Or to put it more bluntly: cash flow matters, but so does keeping the upside open when markets are giving you a trend.

At The Option Premium, we use PMCCs in multiple variations across our model portfolios. Some are classic income-focused, others are ratio-based for directional exposure. If you’d like to see real trade examples, performance tracking, and detailed breakdowns like this each week, you can follow along here.

Probabilities over predictions,

Andy Crowder

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