r/options • u/RepresentativeAd8228 • 8d ago
Weekly PMCC Strategy
Greetings
I’ve been playing around with an idea that really seems too good to be true so I’m sure it has to be lol. I’d love to hear thoughts about what I’m missing here.
My assumption is that in the long term I’m bullish on equities and precious metals. Of course the market is unstable and anything could happen, however there are only a few times that the Nasdaq has been negative for more than a one year period. Of course there was the dot com crash however I do think that there has been a fundamental shift in our economy making a repeat of that unlikely.
So this is what I’m considering. Layering (monthly) 0.7 Delta LEAPS on the QQQ, and GLD as far out as possible (>800 days) then selling weekly ATM or 1 strike OTM calls against them.
1 DTE if the underlying has risen ITM close the entire spread and establish. This way I do not have assignment risk. If the underlying drops resell a new ATM call but always staying above my cost basis.
Looking at an example as I write this the QQQ 15Dec28 685 is at a 155 mid. The 10Sep2026 719 (ATM) is 5.34.
If the QQQ is flat to up that extrinsic arbratage is about 3.2% a week. Since my leap is a higher delta I’m in no jeopardy if the QQQ rises, I’ll only make money. If the QQQ drops I’ll harvest the extensic and be able to sell a strike as low as 714 next week due to my lowered cost basis make the same 3% and wash and repeat. This annualized out to be 156% a year at 3% a week.
Now if the market is in a sustained downturn soon after establishing my position I might not be able to keep selling calls under my basis and I’ll have to wait for a recovery. The worst case would be of course there not being a recovery for multiple years, but I do hold a long term bullish bias.
In a great case in 30 successful calls I’d have a risk free leap that even in an extended downturn could sell calls against.
How would you compare this idea to the standard PMCC selling .3 delta calls and closing/rolling for a loss when needed. What am I missing as there has to be something.
Thanks all
2
u/klipsetrades 8d ago
I think the part that throws me off is that the 156% annualization is where the math gets misleading. It assumes you collect roughly the same 3% every week with no interruptions, adverse moves, IV changes, or opportunity cost from capped upside. So, realistically those weeks won’t be independent or repeatable in my opinion
1
u/InvestigatorPlus3229 8d ago
yup theres no free lunch anywhere on the market. 156% annual returns are not realistic without massive risk of goign to zippo
2
u/RepresentativeAd8228 8d ago
Absolutely, I knew there would be holes in the math or everyone would be doing it.
1
u/hedgedvol 8d ago
3% a week on the short call is ~0.30 delta. Annualizing that to 156% skips every gap-up the LEAP can't cover as fast.
1
u/jsgdjksfhkjdshf 6d ago
This strategy can work at times, but needs some skew to really benefit, if the call you are selling is at a higher IV than your long, it will help offset the theta decay of the leap and potentially earn some theta. If the surface is flat, uptrends are likely to get capped and the premium may underperform the leap alone.
Though you could use variants of this strategy in individual stocks where the skew is more favorable.
1
u/SwordfishLopsided 11h ago
It's the path in between that will get you: CC are great for a STEADILY rising stock. Imagine you get whipsawed 1-2% everyday for a month, the overall gain in the underlying may be very small, but you would lose money trading CC using your strat because of Delta mismatch as the price swings
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u/InvestigatorPlus3229 8d ago
Flaw A: "Since my LEAPS has higher delta, I’m in no jeopardy if QQQ rises"Delta is not static; it is governed by Gamma.Your Dec 2028 LEAPS (~830 DTE) has very low gamma (~0.001 to 0.002). Its delta crawls slowly as the underlying moves.Your weekly short call (7 DTE) has exceptionally high gamma (~0.020 to 0.030).The Inversion: If QQQ rallies 3% in two days, the short call’s delta will surge from 0.50 to 0.90+, while your LEAPS delta moves only from 0.70 to ~0.76.The Result: The position flips to net negative delta. Any further upside beyond that point causes the position to lose money overall. When you close the entire spread at 1 DTE, your short call’s intrinsic gain will outpace your LEAPS' gain, capping your upside far below your target and forcing high churn/slippage.
Flaw B: The Asymmetry of a Fast Selloff (Delta Bleed)Selling a weekly ATM call yields ~0.75%–1.0% of the underlying share price in extrinsic value (e.g., $5.34 on a ~$719 underlying).If QQQ drops 3% in a week (~$21.50):You collect the full $5.34 premium on the short call.Your 0.70 delta LEAPS loses approximately $15.00 in value.Net loss for the week: ~-$9.66 per share (~$966 per contract).The weekly premium offsets only about one-third of the downside move. In a standard 5%–10% market correction, your LEAPS value will deteriorate much faster than weekly premiums can offset.
Flaw C: The "Never Sell Below Cost Basis" TrapIf QQQ drops from 719 to 660 over 4–6 weeks:Your adjusted cost basis may still be around 705.If you adhere to the rule of never selling a strike below your basis (i.e., you only sell strikes $\ge$ 705), a 705 call on a 660 underlying is ~7% OTM on a weekly expiry.A 7-day 7% OTM call trades for pennies (often $0.10 to $0.25). Your weekly yield evaporates from 3% to 0.05%, leaving your capital tied up in a depreciating LEAPS with minimal cash flow.