The Poor Man’s Covered Call Explained

Markus
5 min readJul 14, 2020

I’m Markus Heitkoetter and I’ve been an active trader for over 20 years.

I often see people who start trading and expect their accounts to explode, based on promises and hype they see in ads and e-mails.

They start trading and realize it doesn’t work this way.

The purpose of these articles is to show you the trading strategies and tools that I personally use to trade my own account so that you can grow your own account systematically. Real money…real trades.

The Poor Man’s Covered Call Explained
Petrovich99 via depositphotos.com

What Is The Poor Man’s Covered Call?

Questions we’ll answer in this discussion:

What is it

Who is it for

When to use it

The Poor Man’s Covered Call is a very specific type of spread. As you know, we’ve been covering option spreads for several Coffee With Markus Sessions.

We’ve also covered the Covered Call’s strategy in-depth on our YouTube Channel.

In this article, we’re discussing the difference between trading stocks, covered calls, and the Poor Man’s Covered Call.

Trading Stocks

Let’s take a look at trading stocks first. Let’s say that you’re bullish on a stock like Boeing (BA). If you were bullish on this stock, you might purchase a decent amount of stock, let’s say 100 shares.

At the time of the original writing of this article, this stock’s strike price was $180. If you purchased 100 shares of Boeing, at $180 dollars each, this would require $18,000 in purchasing power.

If the stock increases by $10, to $190, you stand to earn $1,000 in net profit. So you’ve risked $18,000 to earn $1,000. If the stock price increases to $200, you’ll earn $2,000 and so on.

This is pretty basic and you probably understand this concept.

Photo Taken By Author via youtube.com/user/rockwelltrading2008

As you can see in this image, the sliding scale moves to the right as the stock price increases.

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Markus

Markus is a self-made multi-millionaire who was born in Germany. He came to the US in 2002 with $30,000 in his pocket and a dream to become a successful trader.