This strategy can be quite rewarding for a steadily bullish stock.  The construction of the trade begins with purchasing an ITM call 6-8 months out in time.  The purpose of the ITM purchase is to create a stock substitution position with the long call.  Because the call is so far ITM (Delta of at least .80 or better),  the option moves almost in lock step with the stock at a fraction of the cost of the actual stock.

The trader then sells front month calls in order to reduce the cost basis of the long call and produce income.  The strategy is in essence a covered call, but instead of using stock, you use the deep ITM call.  Remember that a large portion of the deep ITM call contains intrinsic value which is not susceptible to the ravages of time decay.  A word of caution, Vega (the greek that measures sensitivity to implied volatility),  is greater in long dated options, so LEAPS will be more vulnerable to IV.

Review the risk graph and you should gain more insight into the risk and reward of the position.  Best, Robin

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