# What Is a Covered Call? Premium, Break-Even, Assignment

> A covered call collects premium on shares you hold, and you may have to sell at the strike. Here is a $150 stock and a $3.50 premium.

Source: MarketCapLens — https://www.marketcaplens.com/learn/what-is-a-covered-call
Updated: 2026-09-22

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**

- Net premium = premium per share × shares − commission.
- Break-even stock price = stock price − net premium per share.
- 100 shares at $150, a $3.50 premium, and no commission: **$350** of premium and a **$146.50** break-even.
- If the shares are called away at a $155 strike, the stock gain to the strike plus the premium is **$850**.

## The formula

> **Net premium = premium per share × shares − commission**
>
> **Static return = net premium ÷ (stock price × shares)**
>
> **Annualized return = static return × (365 ÷ days to expiration)**

One equity option contract is usually 100 shares. The math still runs on another share count. Annualizing assumes you could repeat the same premium and the same number of days for a full year. It ignores assignment and a move in the shares.

## A worked example

Hold **100** shares at **$150**. Sell a call with a **$155** strike, **$3.50** of premium, **30** days to expiration, and **$0** commission.

- Net premium = $3.50 × 100 = **$350**.
- Break-even = $150 − $3.50 = **$146.50**. Below that price, the premium no longer covers the drop in the shares.
- Static return = $350 ÷ $15,000 ≈ **2.33%**.
- If assigned at $155, stock gain is ($155 − $150) × 100 = $500, plus $350 of premium, or **$850**.

The [covered call calculator](https://www.marketcaplens.com/tools/covered-call-calculator) prints those figures. If the strike is below the stock price, assignment would sell the shares below the current price in that scenario. The premium is still collected.

## What the premium figures tell you

They show the cash from the call, the stock price that offsets that cash, and the result if you are assigned at the strike. The annualized percent is a scaling of a short window. A 30-day premium annualized is not a year's income unless you actually repeat it.

## What the premium figures leave out

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](https://www.marketcaplens.com/learn/what-is-a-cash-secured-put).

[Apple](https://www.marketcaplens.com/company/AAPL) shows the share price. It does not show the call premium or the strike. You type those.

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*For general education only. Nothing here is investment advice.*

## Frequently asked questions

### What does a covered call calculator measure?

Net premium is the premium per share times the shares, minus commission. The break-even stock price is the stock price minus net premium per share. At $150 with a $3.50 premium and no commission, break-even is $146.50. If assigned at a $155 strike, the stock gain to the strike plus the premium is $850.

### How is the annualized return calculated?

Static return is net premium divided by the stock position. Annualized return multiplies that by 365 divided by the days to expiration. It assumes you could repeat the same premium and the same days. It is not a forecast.