Strategy Source

Creator/Channel: Tom King

Published Date: June 17, 2025

URL: https://www.youtube.com/watch?v=32ZrW07vLVM

Trade Setup

Action (Sell (-)/Buy (+))	Leg	DTE	Strike Price / Delta Target	Width
Buy (+)	Long Call	180 to 480+	80 Delta	N/A
Sell (-)	Short Call	7	At-The-Money (ATM)	N/A

• Total Capital Required: Varies depending on the underlying asset, representing the total debit paid for the long option (e.g., ~$13,000 for TSLA, ~$13,000 for BRK/B, ~$14,000 for SPY, or ~$16,400 for MSTR based on transcript examples).
• Execution Context: The video demonstrates a theoretical model backed by historical trading account performance to showcase aggressive weekly income generation.

Strategy Application

The “Income PMCC” (Poor Man’s Covered Call) is a variation of the traditional PMCC tailored specifically for a high-risk trading account rather than a long-term investing account. Instead of using the strategy for capital appreciation on the underlying stock, the sole objective here is to harvest weekly cash flow. You are acting like an insurance company—consistently collecting premium payments over time to outweigh the inevitable occasional loss.

• Mechanical Strike Selection: The trade is initiated by buying a deep in-the-money long call targeting the 80 Delta(Strike metric / Directional bias or “probability of success”). To fund the income engine, you simultaneously sell an At-The-Money (ATM) call against it.
• The Time Differential: The core engine of this trade relies on heavily manipulating the expiration timeline. You buy the long call with a massive timeline (minimum 70-90 days, but ideally 180 to 480+ days) and sell the short call at just 7 Days to Expiration (DTE). This structural setup takes advantage of Theta (“Time decay” mechanics), allowing the short weekly option to lose its extrinsic value rapidly while the long-term LEAP (Long-Term Equity Anticipation Securities) holds its value steady.
• The Buffer Zone: Because the long call is purchased at an 80 Delta deep in the money, it creates a structural cushion. If the stock drops, the long call has significant intrinsic value acting as a buffer, while the short call expires worthless, allowing you to pocket the weekly cash to offset the drawdown.
• Market Environment: This setup requires a high-quality, stable growth stock or ETF (like SPY, QQQ, or BRK/B) that is in a clear long-term weekly uptrend (higher highs, higher lows). The precise entry trigger is waiting for a short-term daily pullback—such as the RSI dropping below 50, bouncing off oversold levels, hitting the lower Bollinger Band, or pulling back to the 50, 100, or 200 EMA.

Risk Profile

• Wing Widths: Not detailed in source transcript. Because this is a diagonal spread rather than a vertical spread, traditional wing widths do not apply. The maximum defined loss is capped at the total debit paid for the long call minus the cumulative premium collected over time.
• Assignment Risk: If the stock rallies and the short call goes deep in the money near expiration with low extrinsic value remaining, there is a risk of early assignment. If assigned short shares, you can simply close the long call and net the positions out to cover the obligation.
• Capital Preservation: Never ride a sinking ship into the ground. If the underlying asset completely breaks its technical/economic thesis, or if the net loss on the long calls minus the gains on the covered calls exceeds 30%, the trade is considered dead and must be closed entirely.

Expected Outcome

1. The “Extrinsic Engine” (Your Base Win)

The underlying stock chops sideways, grinds slightly higher, or even drifts lower. The ATM short call expires worthless or is bought back for pennies. You capture 100% of the targeted extrinsic premium for the week. You then immediately sell a new 7 DTE short call to repeat the process, acting as a constant weekly income generator.

2. The “Upward Offset”

The underlying stock rockets upward, blowing past your short call. You will take a localized loss on the short call because you have to pay the intrinsic value to buy it back. However, because you own an 80 Delta long call, your long asset appreciates by 80% of the stock’s move, effectively offsetting the intrinsic loss on the short side. Over time, you continuously net the extrinsic cash flow regardless of the upward intrinsic drag.

Management & Exit Triggers

• Primary Target: Close the short call when 80% to 90% of the extrinsic value is reached.
• Accelerated Quick Win: Close the short call early if you capture 50% profit in less than 50% of the time (e.g., hitting the target in 2 or 3 days). You can then immediately open a new short call for the exact same Friday expiration at a new strike price.
• Macro Profit Taking: Close the entire multi-leg trade structure if the net overall gain (long call appreciation plus short call premiums) reaches 50% to 70% within a year.
• Time Decay Ejection: Close the entire trade when the long call crosses the 60 DTE threshold to avoid accelerated long-term Theta decay.
• Defensive Stop Loss: Close the entire trade immediately if the total net position reaches a 30% loss, or if the fundamental/technical outlook of the stock breaks its weekly uptrend.
• Runaway Momentum Exit: Close the entire trade early if the stock shoots so far past the short call in a matter of days that rolling the short leg no longer makes mathematical sense. Pocket the massive appreciation on the long call, keep the extrinsic value, and walk away.