When You Get Called Away, Your LEAPS Won't Automatically Deliver — The Most Costly PMCC Misconception

“I bought 5 LEAPS and sold 5 Calls, built a PMCC — now I’m bulletproof.”

If that sounds like you, this post is for you. Because the name “PMCC” has fooled almost every beginner — including me, once.

🎯 I. Misconception #1: A PMCC Is a Strategy, Not a Position

In your head, 5 LEAPS + 5 short Calls form one packaged “combo” — one rises, the other falls, and at expiry the system “settles it as a whole.”

Wake up.

To the broker and the OCC (Options Clearing Corporation), the word “PMCC” simply doesn’t exist. They only see two independent contracts:

Leg	Contract	Expiry	Role
Long	Buy $10 Call	9 months out	Your long
Short	Sell $10 Call	This Friday	Your short

“PMCC” is just a name you made up in your head — like naming your cat “Lucky.” The bank account doesn’t pay interest on it.

⚙️ II. Misconception #2: When You Get Called Away, the System “Backs You Up”

This is the deadly one.

Many people assume: when the short leg is assigned, the system will automatically exercise my LEAPS, “deliver the shares” for me, the two legs cancel out, and everyone’s happy.

No. None of that happens.

Here’s the real sequence (you sold 5 × $10 Calls and hold no shares):

On expiry, the stock closes above $10 → your short Call is automatically assigned (this part is automatic; you can’t stop it)
Your account instantly becomes: short 500 shares + $5,000 cash
Your 5 LEAPS? Sitting there, untouched, waiting for you to act

Notice: the system only did one thing automatically — “assign.” It will never touch your LEAPS. Because your LEAPS are still 9 months from expiry, and the auto-exercise mechanism simply doesn’t apply to them yet.

So the next trading day, you open your account and find: short 500 shares + 5 LEAPS + $5,000 cash. The short position is a knife over your head — the higher the stock goes, the more you lose — and only you can close it.

💡 Silent’s Note: In the options world, only two things are automatic: auto-exercise at expiry, and auto-assignment for sellers. Everything else — rolling, closing, unwinding — lives in your own hands.

🛡️ III. Profit or Loss? Depends on Which Path You Manually Choose

Say the stock hits $10.5 at expiry and you get called away. Earlier you:

Bought 5 LEAPS @ $2.2 = $1,100
Sold 5 Calls @ $0.198 = $99

Same assignment, different manual actions, opposite outcomes:

What you manually do	Result
✅ Sell the LEAPS + buy back the short (don’t touch the shares)	≈ +$59
❌ Exercise the LEAPS to deliver (“my gut says close it”)	≈ -$1,001

Where’s the difference? In the “time value” inside your LEAPS.

The LEAPS you bought at $2.2 is worth about $2.6 when the stock hits $10.5. Break it down:

Intrinsic value $0.5 — what you can cash in by exercising
Time value $2.1 — the “waiting value” of 9 remaining months

If you “exercise the LEAPS to deliver,” you only get the $0.5 intrinsic and throw away $2.1 × 500 ≈ $1,050 of time value. The $99 premium you collected can’t fill that hole.

The right move is to sell the LEAPS (not the shares): the options market pays for time value, so your $2.2 turns back into about $2.6 — nothing wasted.

📋 IV. Three Paths — All of Them Require You to Place an Order

① Don’t want assignment, want to keep collecting rent: before expiry, buy back the short Call and roll to a later, higher strike.

② Want to take profit and exit the whole combo: sell the LEAPS + buy back the short Call together (use a spread order in TWS, avoid a naked single leg).

③ Do nothing and get assigned into a short: the next trading day, buy back 500 shares to close the short. Never touch the LEAPS’ exercise button.

The timeline — memorize it:

Before Friday close  → you can still close/roll manually (the only calm window)
After Friday close   → OCC processes, short Call gets assigned
Monday open          → the short appears, now it's firefighting

📝 Hunter’s Summary

The PMCC teaches us to “collect rent with less capital” — but it never promised “the system will clean up after you.”

What you thought was a “combo” is just two independent contracts that happen to live in the same account. Know that they go their separate ways, and you won’t be tricked by the “auto-backstop” fantasy into going naked short.

Related: PMCC: The Poor Man’s Covered Call — 1/3 the Capital, Same Rent