Or are they a steaming pile of garbage? It's hard to analyze because of the long option and the different expiry dates. For a regular CC, lets say I buy 100 shares of spy today @ 470. I sell a covered Jan12 call 472 for 7.30 collecting $730 in premium. The stock hits my short call @ 472 so I sell at a $2 profit plus the premium making $930 in the trade. So what would a PMCC look like to emulate this profit? 1 Long Mar15 (90 days) 453 @ 28.48 (.75 delta) 1 Short Feb16 (60 days) 482 @ 5.23 (.36 delta) Enter the trade @ a 23.25 debit. 75% of the spread is $21.75 so a little expensive, but with the deltas this would be a pretty standard PMCC. Ok so looking at feb16 prices...if price does not move then it looks like: Selling to close the 463@ 26.20 Buying to close the 482@ 6.41 19.79 if the price drops $2 then it looks like this on feb16 Selling to close the 463@ 24.47 Buying to close the 482@ 5.53 18.94 If price goes up $2 then: Selling to close the 463@ 27.88 Buying to close the 482@ 7.31 20.57 No matter what you end up losing money.
@wxytrader, is a std CC not possible in your margin acct? If not then do this: first open the LongStock, and then open the ShortCall. The system should automatically detect that the end result is a CC. Even if it does not: what difference does it make? IMO none, except the inital buying power requirement is higher, BUT this is just temporary, b/c after opening the 2nd leg the requirement reduces to the usual "S - Premium" of CC. Btw, doing it this way is even better than using a CC combination order, b/c the latter one just sits all the time at the broker and waits for the price to match. The bad thing is: it has no impact on the order book. Ie. your Bid/Ask does not go into the orderbook. Whereas the above alternative method is much better as your price goes into the orderbook, but has temporarily a higher initial BP requirement, as shown. I guess by PMCC you mean "PortfolioMargin CoveredCall", right? So, what's the difference in practice?
This difference is the margin. 470x100 is 47k, for than amount you can buy 43 call contracts. If you are right, hats off.
I'm not talking about margin requirements, I'm talking about how their profits compare to regular covered calls...its looks like they are slim to none. They don't behave like regular covered calls...a $2 move with a regular covered call would get you $2 plus the premium you receive, a pmcc looks like you are still losing money.
Yep, I meanwhile have figured out what you mean. IMO just forget it. I myself cannot use it in my CashAcct as it requires a MarginAcct. No thx, but thx
So I have an P/L profile from optionstrat (which btw is much more user friendly than tos) and the profit is showing $455.56 if price hits 480, but the tos chart is showing $239.47. I see that Option strat is averaging the IV across both legs, whereas tos does not...so which is it?
Does anybody use these? If so, can you show a P/L graph for a PMCC that actually out performs a regular put credit spread? I have looked at both and the put credit spread out performs it in every way.
it is hail mary trade, hence the name poorman's covered call, not a comparison. bought 5 orcl sept 2024 100 call and sold 12/22 105 call after earnings dropped last week, now the long leg is up 30.73%. i will roll the short leg to 107-110, with expectation orcl will go back to 115 or above. or i could leave it both at have a projected return at 33% expiring this friday.