Covered Call Calculator
A covered call generates income from stock you already own. You sell someone the right to buy your shares at a fixed price and collect a premium. If the stock stays below that price, you keep both.
How a Covered Call Works
If you own 100 shares of a stock, you can sell a call option against those shares. Selling the call brings in premium — cash you keep immediately, regardless of what happens next. In exchange, you agree to sell your shares at the strike price if the option is exercised.
The word 'covered' means you already own the stock. If you sold the call without owning shares, that's a naked call — a much riskier trade. The covered call is one of the most conservative options strategies because your stock position covers the obligation.
Maximum Profit, Maximum Loss, and Breakeven
Maximum profit: (Strike price − stock cost + premium received) × 100. Your upside is capped at the strike. In the example: ($55 − $50 + $1.50) × 100 = $650.
Maximum loss: The stock falling to zero, minus the premium received. Same downside risk as owning the stock — the premium gives a small cushion.
Breakeven: Stock purchase price − premium received. In the example: $50 − $1.50 = $48.50.
When to Use a Covered Call
A covered call works best when you expect the stock to stay flat or rise modestly. If you're very bullish, selling a call caps the gain you're giving away. It also works well when implied volatility is elevated — higher IV means more premium collected for the same obligation.
Read the covered call strategy guide →