Also called a 'poor man\'s covered call' or diagonal call spread. Instead of buying stock (expensive), you buy a deep in-the-money LEAPS call as a stock substitute, then sell short-term calls against it — like a covered call but with less capital required.
Limited by short call strike minus LEAPS cost basis
Premium paid for LEAPS minus any premium collected
Varies based on strikes and premiums
Long 1 deep ITM LEAPS Call + Short 1 OTM short-term Call
Limited profit and limited risk. Lower capital requirement than covered call.
When you're bullish but want to use less capital than buying shares. When you want to generate income from a LEAPS position. A capital-efficient alternative to the covered call.