MM26 - What happens to your PMCC at Expiration?

This is probably the number one question I get asked in the Options Goddess community, and I have been getting it over and over again. So let's talk about it. What actually happens at expiration when you're running a poor man's covered call?

If you've been following along with my Market Minutes, you know I love LEAPs. I talked about IBIT LEAPs back in MM5, and I've walked through selling calls against positions in MM13 with ALAB. The poor man's covered call, or PMCC, combines both of those concepts. You own a deep in the money LEAP as your long position, and you sell a shorter term call against it to collect premium. It's one of my favorite strategies because it gives you leveraged exposure without tying up the capital that owning 100 shares would require.

For this example, I'm using Marvell Technology. MRVL has made all time highs and broke out of resistance at the 105 area. On my 4 hour IADSS chart, I'm seeing a sell divergence with a +2 mean reversion spike. That tells me we could pull back and retest the 105 to 110 zone. 

Let's say I own the January 2028 $70 call. The delta is 0.88, so this LEAP is deep in the money. The extrinsic value right now is roughly $17. That extrinsic is the portion of the option that is not real value. It's the time and volatility component. So I haven't made all that money quite yet.

Now I sell the May 130 call against it for a $12 credit. My breakeven on that short call is $142. Here's where the question always comes up. What happens at expiration if this short call goes in the money? Most people assume the broker will just use the LEAP to offset the short call. And that is not how it works.