Hello again and I hope this Thanksgiving day has treated you well. Don’t forget to look up or bow down and say thank you to God for all the miracles in your life. I don’t know if it’s just me getting older but I’ve found myself at times this week nearly in tears and overwhelmed with gratitude for God’s many blessings in my life. In fact, here is a Youtube video by Seph Schluter called, “Counting my Blessings” that I really like. I hope you do to!
With that, I’ve finally gotten around to adding a new spreadsheet to the “Free Trading Tools” page and it’s one I think many will be pleased to see. The strategy is known as the Poor Man’s Covered Call but I’ve added the ability to track Poor Man’s Covered Puts and outright stock trades as well. Since, there is the slim possibility of stock being assigned.
But that’s about enough from me, let’s get on with dissecting this spreadsheet so you’re able to begin using it right away. If you’re happy with what I’ve shared and want to say thank you, please visit my Youtube page and subscribe.
The download is 100% safe and free to use. If you have any questions please reach out in the comments below.
Post Agenda
- Poor Man’s Covered Call Strategy Introduction & Concept
- Poor Man’s Covered Call Spreadsheet Layout & Design
- Poor Man’s Covered Call Spreadsheet Data Entry
- Poor Man’s Covered Call Spreadsheet Functionality
- Poor Man’s Covered Call Spreadsheet Performance Tracking
Poor Man’s Covered Call Strategy Introduction & Concept
First, I think it’s imperative that we review the purpose of the Poor Man’s Options Strategy. In short, the purpose is to use a relatively small amount of capital to generate an income. Typically, with a traditional Covered Call Options Strategy, the trader would need to ear mark a relatively large amount of capital to generate the same level of income. In a sense, the Poor Man’s Covered Call Strategy is a hack to the traditional strategy.
Regardless, the strategy is essentially the purchase of a longer dated options contract, otherwise known as LEAPS, and the sell of a nearer dated option. In this way, the trader is able to utilize the leverage of options to generate the same income as if he/she held the stock outright. However, as is life, it’s not all sunshine and rainbows. The problem with holding a LEAPS options versus holding the underlying stock is that LEAPS are slowly decaying in value. Thus, management to the strategy becomes paramount to success.
That said, I won’t spend much time here discussing trading techniques. I’ve done, and will continue to do that in future posts. For now, just know the Poor Man’s Covered Call or Poor Man’s Covered Put is all about generating an income. With the spreadsheet we’ll be looking at below, you’ll be able to track every trade to see exactly how you’re doing with the strategy.
Poor Man’s Covered Call Spreadsheet Layout & Design
Just realized, I forgot to delete the note above Credit/Debit that says to enter the fees to the debit column.
IMPORTANT NOTE – Do NOT enter fees to the debit column!
I ended up rerunning the calculation to take them automatically from the roundtrip commission entry.
Ok, first let’s start with the primary entry page (the first image above). At the top, the first item you’ll come to is the “Open Position Lookup” bar. This function will allow you to pull any unique symbol data into that area. This should simplify having to hunt through one line after another to uncover various data points. Additionally, this allows for every Poor Man’s Covered Call or Put to be tracked from the same spreadsheet. I know I’ve seen others that required each asset have its own sheet.
That said, one caveat to be aware of is if you’re trading multiple PMCC’s on the same underlying. In that instance, you would need to append an identifier to the stock symbol. In the identifier column you can see I just appended a number to the end of the symbol to indicate to the spreadsheet that these trades were different. You can append any identifier you like, whatever makes it easier will work without issue.
Just to the right of the lookup bar is the total performance pane. From here you’ll be able to see exactly how much income has been generated across every position along with the daily income and total profit/loss.
Just below that you’ll need to enter a few pieces of important information. You’ll need to first enter the start date for the strategy. From there, enter the round-trip commission fee and the account starting balance. To keep things simple, I’ve eliminated the need to include fees in the data entry fields. Instead, it just calculates it in the P/L column below.
Next, and what I think is mostly self explanatory, is the primary data entry section. You’ll see along the top bar what information will be required to utilize the spreadsheet.
Required Data Fields
- Expiration Date (not entry date)
- Unique Identifier (if you want all data aggregated together by symbol just enter the relevant ticker)
- Quantity (contracts or shares)
- Type of Contract
- Strike Price
- Credit (total transaction credit, if you sold 10 contracts enter the total credit for all 10)
- Debit (total transaction debit, same as credit)
- Status (set the trades status)
Admittedly, this is more data entry than I would usually prefer but each item is needed to maintain functionality. Still, I think as you acclimate to the spreadsheets use you’ll start to breeze right through.
Lastly, let’s take a look at the “Filter & Performance Tab” (the second image above). The layout of that table is exactly the same as the primary data entry table but I’ve included it there so you could filter it with ease or without concern for messing up a function. The filterable table makes for short work narrowing down every trade for a particular underlying. Additionally, it offers flexibility for customization later, if needed. Data can quickly be extracted from that table without worrying about interrupting the base functionality.
The final section just to the right of that offers some relevant performance graphs. Honestly, I wanted to put them on the primary page but I had concerns they would bleed off screen on most peoples computer monitors. For a larger monitor it would have worked but on something like a laptop, it required to much scrolling right or left. That I thought, would be more annoying than anything else. If you aren’t concerned about it then feel free to copy each graph and paste it to the original page.
Poor Man’s Covered Call Spreadsheet Data Entry
Truthfully, I think I covered most of what you’ll need to know about entering this data in the previous section. Though, I’ll run through it again quickly here to highlight any nuances to the sheets use.
Expiration Date
First, I chose to use the expiration date rather than the entry date so that we didn’t have to enter two dates. For some, days in the trade is an important metric. For me, I’m not so sure. I really haven’t found any consistent “days in trade” number that performs better or worse. If you absolutely must have that metric, feel free to add it to the far right of the calculation columns and you’re good to go.
Unique Identifier
Next, as I mentioned above, you’ll need to append an identifier to multiple trades within the same underlying. If you never open more than one position on, say IWM, you can just enter the ticker symbol. However, if you have multiple longs and shorts running at any given time be sure to separate them here with the identifier. Otherwise, all IWM positions will be aggregated together and you wouldn’t be able to discern which short call belongs with what long and so forth.
That said, once you’ve closed out of a position, you may find value in removing the identifier so you can see how you’re doing on just IWM.
Credit/Debit
The next few sections I think are pretty clear and most calculations are pulled from the “credit” or “debit” columns. Just be sure to double check those entries for each trade if something isn’t looking quite right.
Status
Finally, the “status” column. This column indicates how things should calculate. If you forget to mark a trade as “rolled” or “closed” you’ll see the calculations start to veer off course. With that, if you do roll a trade, I thought adding the roll option made the most sense to account for the roll as we traders see it; a temporary setback, not a failed trade. In actuality, a roll is just the closing of one trade and the opening of another. Still, for most of us options traders we view the roll as a movement transaction. Not technically correct, but this spreadsheet will track it the way we see it. We’re simply moving the option from one month to another or to another strike, etc. We wouldn’t dare accept defeat! 😛
Lastly, once a position is closed, go back to any connected positions and change the “rolled” label to “closed” . Kind of annoying, I agree, but it allowed us to kick the can down the road until we were ready for it.
If any of that was confusing, please reach out in the comments and I’ll be happy to clarify.
Poor Man’s Covered Call Spreadsheet Functionality
I’ll try to be brief here. The spreadsheet is fully unlocked and each formula is viewable/modifiable. Should you want to expand on the sheet or review how I’ve arrived at one result or another it’s open to see.
The lookup bar is just collecting data from the primary table and presenting a total for any one unique position. For example, suppose you had 10 different poor man’s covered calls going on 10 different underlying’s. That would be a lot to keep tabs on from the table alone. By selecting a unique identifier, the calculations will provide the relevant information for that one unique position.
Lastly, the calculation table to the right of the primary data entry table is very rudimentary. It simply takes the start date from the current date to find the DTE. The P/L is a simple calculation from the debit and credit columns that feeds into the balance column. This creates the running balance as trades are open or closed. Still, I may need to address how rolled trades behave in the future. For now, I’m happy with the result.
The filterable table and the graphs on the “Filter & Performance Graphs” tab don’t have any special functionality. They’re really just there to make life easier when looking something up or to see visually, over time, how the poor man’s covered call system is working.
That said, you may eventually notice a few hidden columns from that sheet. Please don’t delete columns Q-U. Those are used to create the graphs.
Poor Man’s Covered Call Spreadsheet Performance Tracking
Honestly, at this point I feel like I’m just repeating myself. I think I structured this post incorrectly but I’m almost at the end and don’t want to start over so I apologize if this has become repetitive.
That said, every piece of data I’ve pulled out of the data table is what I would want to see from my poor man’s covered positions. I want to know, at any moment, am I profitable on a position, generating enough income, or what is my cost basis as of today. All of which I use to keep me focused on my goal. Sure, many more bells and whistles could be added but these suffice for me. If you wish to add others please do and maybe come back to share.
With that, the graphs are merely a visual representation. I don’t know any trader or investor, if they’re being honest, that doesn’t appreciate seeing a good graph of there own data. A simple equity curve going up from left to right is quite the motivator, in my opinion. As such, the graphs I’ve included highlight the most important questions I have;
- Is my balance growing over time?
- What amount of income am I generating?
- How does that income differ over time?
Additionally, I’ve added a year drop down feature to the income by month graph to make viewing multiple years seamless. Each graph will automatically update based on the start date entered on the primary data entry table. So no matter when you come across this spreadsheet it will calculate for up to 12 years worth of data beyond that. That’s a whole lot of PMCC’s!
Final Thoughts
Before we break away, let me state this again, if anything I’ve shared above is confusing please don’t hesitate to reach me in the comments. If this spreadsheet becomes useful to others I’ll probably make a video for my Youtube channel. It’s been a while since I’ve created content over there so this would be a nice way to get back in and provide some value. If it’s not helpful at all please also let me know what could be better. That will benfit us all.
In any case, I feel I’ve rambled on just about enough for one evening. I do hope you enjoy the Poor Man’s Covered Call & Put Options Strategy Spreadsheet. I enjoyed making it and look forward to using it myself in the day’s ahead.
Until the next post.
God bless,
Jeff
