Covered Call Calculator
A covered call pays you a premium now in exchange for capping your upside at the strike. Breakeven drops to your share cost minus the premium; profit stops rising above the strike. Enter your entry price, strike and premium to see both lines.
What you are actually trading away
The default position is 100 shares bought at $100 and one $105 call sold for $2.20. You collect $220 today. In exchange, every dollar the stock finishes above $105 belongs to whoever bought that call.
- Breakeven = share cost − premium received = $97.80. The premium is a small cushion, not a hedge.
- Max profit = (strike − share cost + premium) × 100 = $720, reached anywhere at or above $105.
- Max loss = the shares going to zero, less the premium: $9,780. The short call does nothing to protect you.
That last line is the one that gets skipped. A covered call is not a low-risk position. It is a long stock position with slightly less downside and materially less upside. Everything that can go wrong with owning 100 shares can still go wrong here.
The flat top is the whole trade
Look at where the payoff line stops climbing. Above $105 you keep $720 whether the stock finishes at $106 or $160. Traders who sell covered calls through an earnings report or a takeover rumour find out what that ceiling costs. If you would be genuinely unhappy to sell at the strike, the strike is too low.
Assignment, and what to do about it
If the stock is above the strike at expiration your shares are called away at the strike — that is the deal working as designed, not a failure. American-style equity options can also be assigned early, most commonly just before an ex-dividend date when the remaining time value is smaller than the dividend. If you are running covered calls on a dividend payer, check the ex-div date against your expiration.
Annualising the return honestly
A $2.20 premium on a $100 share over 30 days is 2.2%, and it is tempting to call that 26% a year. That number assumes you can repeat the trade twelve times with the same premium and never get run over on the downside — and the months where you get run over are precisely the months you would not have repeated it. Quote the static return and the if-called return; leave the annualised figure to marketing material.
Where the 100x multiplier comes from
Product specification, not convention: OCC defines a standard equity option as covering 100 shares, premium quoted in points where one point is $100[1] — so a $1.85 premium costs $185, and every payoff here applies that multiplier to the leg structure.
One exception is worth knowing about: adjusted contracts, covered on the options profit calculator.
Calculating it is the easy half
Covered call maths is a two-line calculation. The payoff is arithmetic — anyone can run it. What it cannot show is whether you believed the trade when you put it on, or are describing a winner picked out of a month of noise.
That is the gap kappi closes: the position committed before the fact, sealed and timestamped on a log nobody can edit afterwards. A screenshot of this chart proves you can use a calculator; a sealed commit proves you took the trade. $15/month, no free tier.
Sources
Frequently asked questions
What is the maximum profit on a covered call?
(Strike − your share cost + premium received) × 100 per contract. Anything the stock does above the strike belongs to the call buyer.
What is the breakeven on a covered call?
Your share purchase price minus the premium received. The premium lowers your breakeven but does not protect against a large decline.
Is a covered call a safe strategy?
It is safer than owning the shares alone by exactly the premium you collected, and no safer than that. The maximum loss is still the shares falling to zero, less the premium.
Can my shares be called away before expiration?
Yes. American-style equity options allow early assignment, most often just before an ex-dividend date when the option's remaining time value is less than the dividend.
What strike should I sell?
Mechanically, a higher strike means less premium and more room to run; a lower strike means more premium and a tighter cap. The test is simple: if being assigned at that strike would annoy you, it is too low.