About the Covered Call Calculator
Work out the returns of a covered call: owning shares and selling a call option on them for extra income. Enter the share price, the number of shares, the strike, the premium and the days to expiry, and see the return if the shares are called away, the return if the price stays the same, the break-even price and the yearly equivalents.
The page warns you when the strike is below what you paid less the premium, because then the trade can't break even if the shares are called away.
How it works
Selling one call on every 100 shares brings in the premium straight away. If the share price is above the strike at expiry, the shares are sold at the strike, so the most you can make is the strike minus your cost plus the premium, times the shares.
If the price stays the same, you keep the shares and the premium. If it falls, the premium cushions the loss, so the break-even is the share price minus the premium. Owning 100 shares at 50 and selling the 55 call for 2 gives 200 straight away, at most 700 (14%) if called, and a break-even at 48.
Returns are also shown per year by scaling to 365 days, which makes trades with different expiries comparable. The tests check every result against the same position in the Options Profit Calculator.
Assumptions and limits
- The shares are owned at the price you enter (your cost, or today's price for a new trade).
- One call covers 100 shares; dividends received while holding aren't included.
- Calls on American-style options can be exercised early, typically just before a dividend.
Worked examples
Out of the money
100 shares at 50, sell the 55 call for 2 with 30 days left: 200 of premium (4%, about 48.7% a year), at most 700 if called.
Break-even
The same trade only loses money below 48 at expiry, the share price minus the premium.
Strike below cost
Selling the 45 call for 2 on shares bought at 50 locks in a loss of 300 if the shares are called away.
How to use the Covered Call Calculator
- Enter your shares. The price and how many you own.
- Enter the call. Strike, premium and days to expiry.
- Compare the outcomes. Called away, unchanged and break-even.
Frequently asked questions
How do I calculate covered call returns?
If called away, the profit is the strike minus the share cost plus the premium, times the shares, divided by the cost. If the price stays the same, the return is just the premium divided by the cost. The page shows both, also per year.
What is the break-even on a covered call?
It is the share price minus the premium received, as long as the strike is at or above that level. Below the break-even the shares lose more than the premium earned; the page notes when no break-even is possible.
What happens if the share price rises above the strike?
The call buyer will exercise and your shares are sold at the strike. You keep the premium and the gain up to the strike, but miss out on any rise above it, which is the cost of the extra income.
Which strike should I choose for a covered call?
A strike closer to today's price pays more premium but is more likely to be called away. A higher strike pays less but leaves more room for the shares to rise. Many traders compare the return if called with the return if unchanged.
Is a covered call risky?
It carries almost the whole risk of owning the shares: if the price falls sharply, the premium only covers a small part of the loss. It lowers the break-even a little while capping the upside.
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