Covered call calculator. Get premium income, breakeven, max profit, return if flat, return if assigned, and annualized returns for any covered call trade.
Covered Call Return Formulas
A covered call’s return if the stock stays flat is the premium collected relative to the stock price:
RIF = Prem / S * 100
If the stock is called away at the strike, the return adds the capital gain up to the strike:
RIA = (Prem + (K - S)) / S * 100
Variables:
- RIF is the return if flat (%) – the premium yield if the stock is unchanged at expiration
- RIA is the return if assigned (%) – the total return if shares are called away at the strike
- Prem is the premium received per share ($)
- S is the current stock price ($)
- K is the call strike price ($)
Enter your share cost, the current price, the strike, the premium, and days to expiration. The calculator returns the premium income, the breakeven price (current price minus premium), the downside protection percentage, both returns above with annualized equivalents (multiplying by 365/days), and your maximum profit measured against your original cost basis.
Covered Call Outcomes at Expiration
For 100 shares at $50, selling a $52.50 call for $1.20: how the position performs at different expiration prices.
| Stock at expiration | Outcome | Total P&L vs $50 |
|---|---|---|
| $46.00 | Call expires; keep shares + premium | -$280 (loss cushioned by $120) |
| $48.80 | Breakeven after premium | $0 |
| $50.00 | Call expires; keep shares + premium | +$120 (2.4% in the period) |
| $52.50 | At the strike – maximum profit | +$370 (7.4%) |
| $56.00 | Assigned at $52.50; upside capped | +$370 (gave up $350 of upside) |
The strategy trades unlimited upside for immediate income: every outcome below the strike is improved by the premium, and every outcome above it is capped at the same maximum.
Example Problems
Example 1: Monthly income trade.
You own 100 shares trading at $50.00, bought at $48.00, and sell a 30-day $52.50 call for $1.20.
Premium income = $120. Return if flat = 1.20 / 50 = 2.4%, which annualizes to 2.4 * 365/30 = 29.2%. Return if assigned = (1.20 + 2.50) / 50 = 7.4% (90% annualized). Max profit vs your $48 cost = (1.20 + 4.50) * 100 = $570.
Example 2: Downside protection.
Same position: the $1.20 premium protects 1.20 / 50 = 2.4% of downside, moving your effective breakeven from $50.00 to $48.80.
Frequently Asked Questions
What happens if the stock rises above the strike?
Your shares are almost certainly called away at expiration – you sell at the strike and keep the premium. You still earn the maximum profit, but you forfeit any gain above the strike. Rolling the call up and out before expiration is the common way to keep the shares.
Which strike should I sell?
Closer strikes pay more premium but cap gains sooner; further strikes keep more upside but pay less. Many income traders sell calls around 0.20 to 0.30 delta – roughly a 20-30% chance of finishing in the money – balancing income against assignment risk.
Is a covered call risky?
The main risk is the stock itself: a covered call loses money whenever the stock falls more than the premium received. It is less risky than holding the stock alone by exactly the premium collected, but it is not a hedge against a serious decline.
