Covered call calculator
returns, breakeven, and the cap
Enter what you paid for the shares, the strike you're selling and the premium you're collecting. You get both returns that matter — if the stock sits still and if it gets called away — plus your real breakeven and how much downside the premium actually covers.
If called away
—
stock gain plus premium
If unchanged
—
premium only — the base case
Breakeven
—
cost basis less premium
Upside given up
—
per $1 above the strike
Your covered call
One contract covers 100 shares. Premiums are per share.
what you paid per share
where your shares get called
100 shares each
used to annualise
Profit at expiry
Loss at expiry
Breakeven
Strike & spot
The two returns, and why both matter
Covered call writers quote two different numbers, and confusing them is the most common mistake on this trade.
Static return = premium ÷ cost basis
(stock unchanged — you keep the premium)
If-called return = (strike − cost basis + premium) ÷ cost basis
(stock rises through the strike — shares sold at the strike)
Breakeven = cost basis − premium
Downside cover = premium ÷ current price
Static return is your base case: the stock goes nowhere, the call expires worthless, you keep the premium and still own the shares. If-called return is the ceiling: it includes the gain up to the strike, and it is the most this position can ever make.
The cap is the cost. Above the strike, every extra dollar the stock gains is a
dollar you don't get. Selling a call on a stock you expect to run is how covered-call
writers underperform simply holding it — you kept a small premium and handed over an
unbounded gain.
Worked example
Shares bought at $100, selling the 105 call for $3.00 with 30 days left:
| Where the stock lands | What happens | P/L per contract |
|---|---|---|
| Below $97.00 | Premium no longer covers the loss | Negative |
| $97.00 | Breakeven — premium exactly offsets the drop | $0 |
| $100 (unchanged) | Call expires worthless, keep the shares | +$300 |
| $105 or above | Shares called away at $105 | +$800 (capped) |
What this doesn't tell you
- Downside is still yours. The premium cushions a fall, it doesn't stop one. A 3% premium on a stock that drops 30% leaves you down 27%. A covered call is not a hedge.
- Early assignment happens. American-style calls can be exercised any time, most often just before an ex-dividend date when the call is in the money. You can lose the shares — and the dividend — earlier than expiry.
- Tax consequences are real. Being called away is a sale. On long-held shares with a low basis, that can trigger a bill far larger than the premium collected. This calculator shows gross P/L only.
- Annualised returns flatter short trades. A 3% return over 30 days annualises to about 36%, but only if you can repeat it twelve times — which assumes twelve more months of suitable premium and no assignment.
Frequently asked questions
What is the breakeven on a covered call?
Your cost basis minus the premium collected. Buy shares at $100 and sell a call for $3.00 and you break even at $97.00 — below that, the position loses money. Note this is your basis, not the current price: if the stock has already moved since you bought, breakeven follows what you paid, not what it trades at today.
What is the difference between static return and if-called return?
Static return assumes the stock finishes unchanged — the call expires worthless and you keep the premium and the shares. If-called return assumes the stock finishes at or above your strike, so the shares are sold at the strike; it includes both the premium and the gain up to that strike. If-called is always the higher of the two, and it is the maximum this position can make.
How much downside protection does a covered call give?
Only the premium. Collecting $3.00 on a $100 stock cushions the first 3% of a decline and nothing beyond it. Covered calls are frequently described as a conservative strategy, but the downside below breakeven is the same as owning the shares outright. If you want real protection, that is what a protective put or a collar is for.
Can my shares be called away before expiry?
Yes. American-style options can be exercised at any point, and the common trigger is an in-the-money call just before an ex-dividend date, where exercising early captures the dividend. If you are writing calls on dividend payers, check the ex-dividend calendar against your expiry.
Which strike should I sell?
That is a trade-off, not a right answer. Closer to the money means more premium and more chance of being called away; further out means less premium and more upside kept. The calculator makes the trade-off visible — try a few strikes and compare static return against how much upside you are giving up.
Does this include commissions, dividends or taxes?
No. Figures are gross. Dividends received while you hold the shares add to your return and are not shown; commissions subtract from it; and being called away is a taxable sale that can matter far more than the premium on long-held, low-basis shares.
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