Try these example inputs in the Covered call calculator.
These figures match this guide's worked example. They are illustrative. They stay on this device and never appear in the URL.
A covered call is a share position plus a call you sell against those shares. You collect a premium. In exchange, you may have to sell the shares at the strike if the call is assigned.
Key takeaways
Option shares = contracts × multiplier
Covered shares = the smaller of shares held and option shares
Uncovered shares = shares held − covered shares
Net premium = premium per share × option shares − commission
Premium yield on covered stock value = net premium ÷ (stock price × covered shares)
Unchanged-price return = ((min(stock price, strike) − stock price) × covered shares + net premium) ÷ (stock price × covered shares)
One equity option contract is usually 100 shares. Adjusted contracts can use another whole-share multiplier. Premium yield is the cash from the call on the covered lot. Uncovered shares keep moving with the stock. Unchanged-price return is profit if the covered shares sit still and the call is settled. Annualizing either percent multiplies it by 365 ÷ days to expiration. That scaling assumes you could repeat the same setup. It is not a year's income unless you actually repeat it.
Hold 100 shares and sell 1 standard contract at $150. The call has a $155 strike, $3.50 of premium, 30 days to expiration, and $0 commission.
Those outcomes in one table, ignoring other costs:
| Outcome at expiration | Stock result | Premium | Strategy result |
|---|---|---|---|
| Shares to $0 | −$15,000 | +$350 | −$14,650 |
| Shares unchanged at $150 | $0 | +$350 | +$350 |
| Assigned at $155 | +$500 | +$350 | +$850 |
Maximum loss in this long-stock-plus-short-call sketch is the stock going to zero, reduced by the premium you keep. Maximum gain is capped at the strike plus the premium. Early assignment can happen before expiration, especially around a dividend.
A call struck below the stock price is different. Hold those same 100 shares at $150 and sell a $140 strike for $12 of premium, 30 days, and no commission. Premium yield is $1,200 ÷ $15,000 = 8%. If the shares sit at $150, the call is assigned at $140, so profit is ($140 − $150) × 100 + $1,200 = $200, or 1.33% on $15,000. Simply annualizing that 1.33% over 30 days is about 16.22%. Annualizing the 8% premium yield would overstate the strategy.
The covered call calculator prints those figures. If you hold 150 shares and sell one standard contract, 100 shares are covered and 50 are uncovered. Uncovered shares are not capped by the strike. If the strike is below the stock price, assignment would sell the covered shares below the current price in that scenario. The premium is still collected.
They show the cash from the call, the stock price that offsets that cash, profit if the shares sit still, and the result if you are assigned at the strike. An annualized premium yield is a scaling of the cash from the call. It is not total strategy return when the strike is below the stock price.
Early assignment, a dividend, taxes, and a change in the option price before expiration are absent. Selling the call caps the sale at the strike plus the premium you keep. The shares can still fall through the break-even price. The other side of a premium sale, where you might have to buy shares, is a cash-secured put.
A company page shows the share price. It does not show the call premium or the strike. Type those in the covered-call calculator. The Options Industry Council describes the same structure in its covered call overview (opens in a new tab).
For general education only. Nothing here is investment advice.
Formulas and worked examples are MarketCapLens's. See who checks the numbers.