Here's my critique on this methodology ... .
Pro's: (1) The strategy is great as a long-term play for a core position (for example, in an index like SPY or in TLT ), particularly if you value simplicity and don't want to be legging into and out of spreads or iron condors repeatedly. Basically, you roll the short call over time, reducing the cost basis in your synthetic, long-dated long call, while leaving the long call alone. (2) It's far cheaper than doing a standard covered call, where you'd have to buy 100 shares of IWM at a cost of some $11k or so. (3) As compared to a standard covered call, you also get to "pick your price" by selecting a far OTM strike to sub in for your . (4) Since you leave the long call alone, you basically only pay for fees/commissions for the rolling of the short call after setup.
Con's: (1) Depending how far OTM and how distant in time you go with your long-dated option, the strategy is pricey to initiate and keep on, particularly if you have a smaller sized account. (2) The strategy is best hedged with an oppositional setup (in this case, a poor man's covered put), so that you can take advantage of price movement either way for the duration of the setup. However, you pay a debit to get into both sides, so you don't get one side "margin" free as you would with, for example, an iron condor.