Diagonal Bull Call Spread
Also known as: Poor Man's Covered Call
Moderately bullish — want covered-call-like income without owning the stock, using a long-dated ITM call as a synthetic stock substitute (poor man's covered call)
Risk Profile at a Glance
How to Construct the Diagonal Bull Call Spread
- 1.Buy 1 longer-dated call at a lower strike (deep ITM or ATM)
- 2.Sell 1 near-term call at a higher strike
- 3.Different strikes AND different expirations
- 4.Net debit
Understanding the Diagonal Bull Call Spread
The diagonal bull call spread, commonly called the poor man's covered call, replaces stock ownership with a deep in-the-money LEAP call (12–18+ months out) and sells near-term calls against it each month. This creates covered-call-like income at a fraction of the capital required to own 100 shares. The long LEAP has a delta close to 1, so it moves nearly dollar-for-dollar with the stock. Each month, you collect premium from the short near-term call.
If the stock rises past the short strike, the LEAP appreciates and the short call can be rolled higher. The EdgeOS bull count 1–3 with a moderately bullish trend (confirmed or fluid bull) is the ideal setup: you enter the LEAP when the setup triggers and sell monthly calls as the bull count progresses toward exhaustion. This strategy has become extremely popular as an efficient way to generate options income with significantly less capital than traditional covered calls. Strike selection matters: the LEAP should be deep ITM with delta above 0.80..
When to Use It — EdgeOS Signal Integration
- ✓Ideal when SCTR > 9 and EdgeOS bull count = 1 (fresh ignition trigger)
- ✓Extension score below 0.8 (Tight or Mod) — stock has room to run
- ✓Confirmed or fluid bullish trend — EMA alignment supports the direction
Compare with Similar Strategies
Other Diagonal Spreads Strategies
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Frequently Asked Questions
What is the Diagonal Bull Call Spread options strategy?
The diagonal bull call spread, commonly called the poor man's covered call, replaces stock ownership with a deep in-the-money LEAP call (12–18+ months out) and sells near-term calls against it each month. This creates covered-call-like income at a fraction of the capital required to own 100 shares.
When should I use the Diagonal Bull Call Spread?
Moderately bullish — want covered-call-like income without owning the stock, using a long-dated ITM call as a synthetic stock substitute (poor man's covered call)
What is the maximum loss on the Diagonal Bull Call Spread?
The maximum loss is fully defined at entry: the net debit paid (for debit strategies) or the spread width minus the credit received (for credit spreads). You can never lose more than this amount.
How does the Diagonal Bull Call Spread compare to similar strategies?
The Diagonal Bull Call Spread is a bullish complex strategy. Compared to the Covered Call (neutral, complex), the Diagonal Bull Call Spread has limited max risk and limited max reward. Your choice depends on your directional bias, IV environment, and risk tolerance. The TraderValue strategy comparison tool lets you see the exact payoff differences side by side.