StreetAlpha

Covered Call Calculator

See what selling a call against shares you own earns if the stock stays put, what it earns if the shares are called away, and how much downside the premium covers.

$
$
$

Results update as you type. Nothing you enter leaves your browser.

Return if called away
–
Return if the stock is unchanged
–
Unchanged return, annualized
–
Premium collected
–
Breakeven price
–
Downside cushion
–
Max profit
–
Stock alone against the covered call at expiration

How it works

A covered call sells someone the right to buy your shares at the strike. You keep the premium either way. If the stock finishes above the strike, your shares are sold there; if not, you keep them and can sell another call.

The trade gives up gains above the strike in exchange for income now. The premium also lowers your breakeven, so it cushions a small drop, but the shares still carry most of the downside.

The formula

Return if unchanged = Premium ÷ Stock price
Return if called = (Strike − Stock price + Premium) ÷ Stock price
Breakeven = Stock price − Premium
Annualized = Return × 365 ÷ Days

Worked example

Own 100 shares at $50 and sell a 30 day $52.50 call for $1.20. You collect $120. If the stock stays at $50, that is a 2.4% return, about 29.2% annualized. If the shares are called away at $52.50, you make $2.50 + $1.20 = $3.70 a share, or 7.4%. The breakeven drops to $48.80.

Covered Call questions

What happens if the stock falls a lot?

You keep the premium, but the shares lose value below the breakeven just as they would without the call. A covered call cushions a small drop, not a large one.

Should I pick a strike above or below the stock price?

A strike above the price leaves room for the shares to gain before they are called away. A strike below pays more premium but caps your gain below today’s price.

Is the annualized return realistic?

Only if you could sell a similar call every period and the stock behaved the same way. Treat it as a way to compare calls with different expirations, not a forecast.

Related calculators

Options Profit and LossPayoff at expiration for calls, puts, spreads and stock, up to four legs.Black Scholes and GreeksFair value of a call and a put, with delta, gamma, theta, vega and rho.Expected MoveThe one and two standard deviation range from implied volatility.All calculatorsTrade planning, options, growth and risk

For informational and educational purposes only. Not investment advice, and not a recommendation to buy or sell any security. Results are estimates from the numbers you enter.