Poor man's covered call
The poor man's covered call replaces owning the index with a deep in-the-money call. Here the strategy buys a NIFTY call of about 0.80 delta roughly two months out, then sells a 0.25-delta weekly call against it every week to collect premium. It is a diagonal spread: cheaper than holding futures with a sold call, with the long call's cost as the most it can lose.How it trades
Results
PRE-BUILT · DEFAULTSWhere it made and lost money
This is a bullish position, and in this test the market's direction during each two-to-four-week cycle decided the outcome. The 11 cycles during which NIFTY fell more than 1% lost ₹2,10,429 in total: the deep in-the-money call moves almost one-for-one with the index, and the small weekly premium could not offset that, so most of these hit the 30% stop. The 5 cycles during which NIFTY rose more than 1% all won, making ₹1,71,189, as the long call gained more than the weekly shorts gave back; the three flat cycles lost ₹51,726. Entries on trend days made ₹75,538 over 8 cycles, while those on quiet days lost ₹98,673 over 8, and entry days that closed below the open lost ₹1,25,032 over 11.
About this strategy
- At 09:20, when flat, buy one lot of the call closest to 0.80 delta on the NIFTY monthly expiry closest to 60 days out (45 to 75 days).
- Sell one lot of the call closest to 0.25 delta on the nearest weekly expiry, with a strike above the long call.
- On each weekly expiry day at 15:15, buy back the short call and sell the next week's 0.25-delta call.
- If the long call falls 30% below its cost, close everything.
- When the long call has fewer than 30 days left, close everything at 09:20 and immediately buy a fresh long call about 60 days out.
Why traders use it
A classic covered call needs the full value of the underlying. Using a deep in-the-money call instead gives similar upside for a fraction of the capital, while the weekly calls sold against it bring in steady income. Weekly options decay fastest, so the short leg is replaced often, and the long call decays slowly because most of its value is intrinsic. Traders who are mildly bullish on NIFTY use it to earn premium while keeping most of a rise.
The year in plain words
On NIFTY from 1 Oct 2025 to 30 Sep 2026 with default settings, the strategy completed 19 long-call cycles, won only 32% and lost ₹90,966 before costs, a profit factor of 0.66. Twelve cycles ended on the 30% stop on the long call and seven on the scheduled roll. Average wins (₹28,849) were larger than losses (₹20,312), but with fewer than a third of cycles winning, the losses dominated. April was the best month (+₹61,750) and March the worst (−₹97,776). The maximum drawdown was ₹1,70,891. After ₹20 per order and bid-ask slippage on the weekly rolls, the loss grew to ₹1,53,187.
What the settings do
Risks
- The long call behaves much like long futures, so a market fall hurts it far more than the weekly premium helps.
- A sharp rally can run through the weekly short while the long call's delta is below 1, so the spread can lose even on the way up.
- Weekly rolls add two orders every week, which adds up over a year.
- The 30% stop limits each cycle's loss, but repeated stops in a downtrend compound.
Who it suits
Mildly bullish positional traders who want covered-call income on NIFTY without the capital for futures, can manage a weekly roll, and accept that a falling market will hit the position hard.
Questions traders ask
What is a poor man's covered call?
It is a covered call that uses a deep in-the-money, longer-dated call instead of owning the underlying. The trader sells shorter-dated, out-of-the-money calls against that long call to collect premium. It needs much less capital than a normal covered call, and the most it can lose is the cost of the long call.
Is the poor man's covered call on NIFTY profitable?
Not in this test. From 1 Oct 2025 to 30 Sep 2026 it lost ₹90,966 before costs and ₹1,53,187 after ₹20 per order and bid-ask slippage (statutory charges not included). A rising year would likely look different, and past results do not guarantee future ones.
Why sell weekly calls against a monthly call?
Weekly options lose their time value fastest, so selling one each week collects more premium over a month than a single monthly call would. The long monthly call decays slowly because most of its price is intrinsic value.
Is this the same as a diagonal spread?
Yes. A diagonal spread buys and sells options of the same type with different strikes and different expiries. The poor man's covered call is a bullish diagonal call spread with the long call deep in the money.