Covered Call Calculator
Calculate the profit, breakeven, and return on a covered call options strategy.
See maximum profit, downside protection, and annualized yield.
A covered call is an options strategy where you own 100 shares of a stock and sell a call option against them. You collect the option premium immediately but cap your upside at the strike price.
The Key Formulas:
Maximum profit = (Strike price − Stock purchase price + Premium received) × 100
Break-even price = Stock purchase price − Premium received
Maximum loss = (Stock purchase price − Premium) × 100 (if stock goes to zero)
Worked Example:
- You own 100 shares of XYZ at $50 per share (cost basis: $5,000)
- You sell 1 call option at $55 strike price for $2.00 premium
- Premium received: $2.00 × 100 = $200 (immediate income)
If stock stays below $55 at expiration:
- Option expires worthless, you keep $200 premium
- Annualized yield: $200 / $5,000 = 4% for that option period
If stock rises above $55:
- Shares get called away at $55
- Total profit: (55 − 50 + 2) × 100 = $700
If stock falls to $46:
- Break-even: $50 − $2 = $48 (premium cushions losses to $46–$48)
- Loss at $46: (50 − 2 − 46) × 100 = $200 loss (vs $400 without the call)
Options Greeks for Covered Calls:
| Greek | What It Measures | Impact |
|---|---|---|
| Delta | Price movement per $1 stock move | 0 to 1.0 |
| Theta | Time decay per day | Positive for option seller |
| Implied Volatility | Market’s expected movement | Higher IV = higher premiums |
Practical Tips:
- Sell calls at 30–45 days to expiration to maximize theta decay
- Strike price 5–10% above current stock price (out-of-the-money) balances income and upside
- Avoid selling calls before earnings announcements — IV spikes can dramatically increase buyback cost
- Most profitable in sideways or slowly rising markets
How we build and check this calculator
This calculator runs entirely in your browser, so the numbers you enter stay on your device. The math behind it is written by hand and tested against worked examples and standard references before the page goes live.
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