Free Calculator
Covered Call Calculator
Enter your cost basis, call strike, premium, and contracts to see premium collected, max profit if called, breakeven, static return, and if-called return — with a payoff chart you can read at a glance.
Sell to open (short call)
Premium Collected
$200
Max Profit
$700
if called away at $55
Max Loss
-$4,800
theoretical, if stock goes to $0
Breakeven
$48.00
Static Return
4.0%
if stock is flat, premium / cost basis
If-Called Return
14.0%
total return if shares are called away
Actually placing this Covered Call?
Track it in your journal — free, no credit card required — and see if it pays off once you close it.
What is a covered call?
A covered call is one of the most popular income strategies for stock investors. You already own (or simultaneously buy) at least 100 shares of a stock, then sell a call option against those shares. The call buyer pays you a premium up front — that premium is yours to keep no matter what happens next.
The tradeoff: if the stock rises above the call's strike price by expiration, your shares will be “called away” (sold) at that strike. You cap your upside in exchange for immediate income. If the stock stays flat or drops modestly, you keep your shares and the premium, which lowers your effective cost basis.
How the calculator works
Enter your per-share cost basis (what you paid for the shares), the current stock price (for chart centering), the call strike and premium you're selling, and the number of contracts. The calculator computes the combined stock-plus-short-call payoff at expiration across a range of prices and reads off all key metrics: premium collected, max profit if called, breakeven, max loss (theoretical), static return, and if-called return.
Covered call formulas
- Premium collected = call premium × 100 × contracts
- Max profit (if called) = (strike − cost basis + premium) × 100 × contracts
- Max loss (theoretical) = (cost basis − premium) × 100 × contracts (stock goes to $0)
- Breakeven = cost basis − premium received
- Static return = premium ÷ cost basis (expressed as %)
- If-called return = (strike − cost basis + premium) ÷ cost basis (expressed as %)
Worked example
You bought 100 shares at $50 (cost basis). The stock is now trading at $52. You sell 1 call at the $55 strike for $2.00 premium:
- Premium collected: $2.00 × 100 = $200
- Max profit: ($55 − $50 + $2.00) × 100 = $700, if called away at $55
- Max loss: ($50 − $2.00) × 100 = $4,800, theoretical if stock goes to $0
- Breakeven: $50 − $2.00 = $48.00
- Static return: $2.00 ÷ $50 = 4.0%
- If-called return: $7.00 ÷ $50 = 14.0%
These are the exact defaults loaded in the calculator above — change any field to model your own trade.
Common mistakes
- Selling a call with a strike below your cost basis — if the stock rises and you're called away, you lock in a guaranteed loss on the shares (the premium might not fully offset it).
- Chasing high premium on earnings announcements or high-IV names without accounting for gap risk. A stock that jumps 15% overnight will blow through your strike, and you lose all the upside above it.
- Forgetting that the theoretical max loss is your full cost basis minus the premium collected. If the stock craters to zero, owning the shares is the risk — the short call only reduces that loss by the premium.
- Not considering that being called away means giving up all further upside beyond the strike. If you're bullish long-term on the stock, selling a covered call too close to the money can cost you more in missed gains than you earned in premium.
FAQ
Covered call questions, answered.
What is a covered call?
A covered call is an income strategy where you own at least 100 shares of a stock and sell (write) a call option against those shares. You collect the option premium up front in exchange for capping your upside — if the stock rises above the call's strike price, your shares will be called away at that strike.
How do you calculate max profit on a covered call?
Max profit = (call strike − cost basis + premium received) × 100 × contracts. This represents the best-case scenario where the stock is at or above the strike at expiration — you keep the premium and also capture any appreciation from your cost basis up to the strike price.
How do you calculate the breakeven on a covered call?
Breakeven = cost basis − premium received. The premium you collect lowers your effective cost basis. If the stock drops to that level at expiration, you break even on the combined position (stock loss offset by the premium kept).
What is the difference between static return and if-called return?
Static return is the premium you collect divided by your cost basis — it measures your income if the stock is flat and the call expires worthless. If-called return includes both the premium and any capital gain from cost basis to strike — it measures your total return if the shares are called away. If your strike is above your cost basis, if-called return is always higher than static return.
Is a covered call bullish or neutral?
Mildly bullish to neutral. You profit most if the stock rises to the strike price but not beyond it, letting you keep your shares and the full premium. It underperforms holding the stock outright if the stock rallies sharply above the strike.
Does this calculator use real-time option prices?
No — this is a manual-input calculator. Enter the strike and premium from your broker's option chain to model the trade before or after you place it.
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