Free Tool
Covered Call Calculator
Model selling a call against shares you already own. Enter your cost basis, the strike, and the premium to see the income collected, your breakeven, the capped maximum profit if you’re called away, and how much downside the premium protects.
Net cost (basis)
$9,600
Breakeven
$96.00
Max profit (called)
$1,400
Max loss
−$9,600
Static return
4.0%
If-called return
14.0%
Downside protection
4.0%
Premium collected
$400
You own 100 shares bought at $100.00 and sell 1 call at the $110 strike, collecting $400 up front. If the stock finishes at or above $110 you’re called away for a $1,400 gain (the most you can make). Below $96.00 you start losing money, though the premium cushions the first 4.0% of any drop. Figures are at expiration and exclude commissions, fees, taxes, dividends, and early assignment.
How to Use It
- 1. Enter your share purchase price — your cost basis per share.
- 2. Pick the call strike and premium — the strike you’ll sell at and the premium per share you collect.
- 3. Set the number of contracts — one contract covers 100 shares, so you need 100 shares per contract.
- 4. Read the diagram — the payoff rises with the stock, then flattens at the strike where your upside is capped.
How the Payoff Is Calculated
A covered call is just your shares plus a short call. At expiration the calculator adds them together:
- Stock P/L = (price − purchase price) × shares
- Short call P/L = (premium − max(price − strike, 0)) × shares
- Breakeven = purchase price − premium
- Max profit = (strike − purchase price + premium) × shares
New to the idea? Start with What Is an Option and Basic Option Risk and Reward Profiles. The covered call is also the second half of the wheel strategy — the first half, selling puts to acquire the shares, is modeled by the cash-secured put calculator.
Frequently Asked Questions
How does a covered call make money?
You already own at least 100 shares and sell one call option against them, collecting the premium up front. If the stock stays below the strike, you keep the premium and the shares. If it rises above the strike, your shares are sold (called away) at the strike — you keep the premium plus any gain up to the strike, but give up the upside beyond it.
What is the breakeven on a covered call?
Breakeven is your share purchase price minus the premium per share you collected. The premium lowers your effective cost basis, so the stock can fall by that amount before the overall position loses money.
What is the maximum profit?
The most you can make is (strike − purchase price + premium) × 100 per contract, reached when the stock finishes at or above the strike and the shares are called away. Any move above the strike does not add to your profit.
What is the biggest risk?
The downside is almost the same as owning the stock outright: if it falls sharply you still hold the shares and can lose most of your investment, cushioned only by the premium. Covered calls reduce risk slightly but do not protect against a large decline.
Educational tool only. This calculator models a covered call held to expiration and excludes commissions, fees, taxes, dividends, and early assignment. It is not financial advice.