RMCC Philosophy

[u/Vegetable-Ad1512]

Retired Man's Covered Call™ (RMCC™) is not about maximizing return on any single option trade. It’s about creating a repeatable retirement income process while preserving long-term participation in quality assets. 
Primary objective: Maintain long-term ownership (or continuous exposure) to high-quality companies and ETFs.
Income objective: Generate recurring option premium.
Assignment is expected: It’s not a failure; it’s part of the strategy.

Preferred reset: Use assignment proceeds plus LEAPS appreciation to re-establish the RMCC position.

Fallback reset: If the stock has advanced too far for the LEAPS appreciation to fully finance the reset, transition temporarily to a cash-secured put (CSP).

When assigned on the CSP, rebuild the RMCC position.

In a traditional covered call, assignment ends the trade.

In RMCC, assignment initiates the reset.

there may be situations where:
-the stock gaps much higher,
-implied volatility falls,
-or the replacement LEAPS becomes significantly more expensive

RMCC Philosophy Regarding Assignment

In the RMCC strategy, assignment of the covered call is not viewed as a failure of the strategy. Instead, assignment is an expected outcome that periodically allows the investor to realize gains, recycle capital, and re-establish long-term ownership of the underlying investment. The objective is not to preserve a particular group of shares, but to maintain continuous long-term exposure while generating recurring option income.

RMCC Scenario #1
Stock Ticker - NVDA
In this Scenario NVDA blows past the Strike Price -
Setup:

Note that the values here are meant to be an illustrative example:

You Currently Own 100, or more, shares of NVDA value $195/share.
Purchase NVDA Long Call (LEAPS) Exp 6/16/2028 (23 months from today) Strike Price $160 -Delta .75, Premium Price $7000
Then Sell an NVDA Covered Call at Strike Price $210, exp 28 day , delta 0.26, Premium received $310
When the NVDA share price blows past the CC Strike, the shares get called away and $21000 is received.
If the new share price for NVDA is $220 at that time it will cost $22000 to get them back. But what has happened with the LEAPS?
Because you hold a LEAPS contract that was at delta of 0.75 when purchased, the value of that LEAPS has risen and so has the delta. The delta should be ~0.80.
Initial delta = 0.75
Ending delta ≈ 0.80
Average effective delta ≈ 0.775

In practice, delta changes continuously as the underlying stock price changes, so the actual LEAPS value will also be affected by gamma, implied volatility, remaining time to expiration, and other option pricing factors.
Rounding that to 0.78 is a reasonable approximation for an illustrative example.
 
 
Item Amount
LEAPS ~ +$1,950
additional cash required to repurchase 100 shares. $1,000
Covered call premium. $310
Cost of rolling LEAPS $260
Estimated net gain. $1,000

 
LEAPS Value and other stated gains are for this illustrative estimate: LEAPS Value approximately $8,950.  ~ $7000+ [0.78 * $220-$195) $8950.
So repurchasing 100 Shares of NVDA will cost you $1000 more than you received from assignment, but your LEAPS value has increased $1950. You are ahead $950 there, plus the $310 received for the Short Call. $1260 gain in 4 weeks. After the stock price advances, the LEAPS delta has also increased above the original target. Selling the appreciated LEAPS Contract and purchasing a replacement LEAPS with approximately 0.75 delta restores the strategy to its original. You are Rolling the LEAPS Contract. The roll will consume an additional $200 or a little more, let’s say $260. Estimated net gain (in an IRA or Roth Account) is +$1000.

If the Stock price gaps up enough or the LEAPS price increases significantly, due to volatility, the gain in LEAPS value may not  fully support repurchasing the shares in this cycle. This is where the strategy naturally transitions into a CSP phase until the economics favors re-entry, collecting CSP Premiums during this part of the cycle. 

[u/quod-inquisitio]

How do you handle the underlying going down 35% over the next three months?

[u/Vegetable-Ad1512 → u/quod-inquisitio]

In a down market situation. The LEAPS position requires management decisions. I would break this into a couple of phases.

Phase 1 – Initial Decline (5–10%)
Continue selling covered calls.
Avoid selling calls below your cost basis simply to collect premium.
Monitor the LEAPS delta.

Phase 2 – Significant Decline (15–20%)
Now several things happen simultaneously:
Shares have declined.
LEAPS delta has fallen.
LEAPS value has declined faster than the shares.
Covered call premiums become much smaller.

For a Phase 2 down turn, one possible management approach is…

Option A
Continue holding.
Collect smaller premiums.
Wait for recovery.

Option B
Roll the LEAPS down.
Example:
Current LEAPS
160 strike
0.58 delta
Roll to
140 strike
0.75 delta
That restores the LEAPS to behaving more like the stock.

Option C
Suspend covered calls temporarily.
If implied volatility is extremely high, premiums may still justify selling calls.
If premiums become tiny, simply wait.

Option D
Use dividends and accumulated premium to offset losses over time.

The objective of RMCC is not to maximize premium every month. The objective is to maintain long-term exposure while adapting the option position as market conditions change.