Covered call calculator.

How the math works

Every number above comes from five inputs and no hidden assumptions. If you want to check the arithmetic by hand, here it is.

Contracts

One contract per 100 shares, rounded down. A covered call is only covered if you hold the shares to deliver, so 250 shares supports two contracts, not two and a half. The leftover 50 shares can't be written against.

Breakeven and downside protection

Breakeven is your share price minus the premium per share. Collect $1.20 against stock at $50.00 and you break even at $48.80. Downside protection is that same premium as a percentage of the share price: 1.20 / 50.00, or 2.4%.

It's worth being blunt about what that means: a covered call's entire cushion is the premium. It is not a hedge. Below breakeven you take the loss exactly as you would holding the stock outright, and a 2.4% cushion does nothing about a 30% drawdown.

The two returns

Static return assumes the stock is unchanged at expiration and the call expires worthless: the premium divided by the share price. You keep the shares and can write another call.

Return if assigned assumes the stock closes above the strike and your shares are sold: the premium plus the gain from your share price up to the strike, divided by the share price. If you sell a call with a strike below your cost basis, that gain is negative, and the calculator will say so rather than quietly hiding it.

Annualizing

Both returns are for a single position over a single expiration, so comparing a 7-day trade to a 45-day one needs a common scale. Multiplying by 365 / days gives one. This is simple annualization, not compounded, which is the convention most options desks and brokerages use. It does not assume you reinvest the premium.

Which price should I enter?

Enter your cost basis to see what the position returns against what you actually paid. Enter today's price to judge the trade on its own merits right now, which is usually the more useful question, because the past price you paid shouldn't decide whether today's premium is worth taking.

What this doesn't model

Commissions and contract fees, taxes (assignment is a sale, with whatever that triggers for you), dividends and the early-assignment risk that comes with them around the ex-date, and early assignment generally. It also assumes you hold to expiration rather than rolling or buying the call back. Real positions get managed; this is the clean version.

Common questions

What happens if the stock goes above the strike price?

The call is likely assigned and your shares are sold at the strike. You keep the premium and the gain up to the strike, and you give up everything above it. This is the real cost of the strategy, and it's easy to underrate because the upside you capped never shows up on a statement. You only see the premium you did collect, not the gain you didn't.

Is a higher premium better?

Not on its own. Premium is compensation for risk, so an unusually rich one usually means the market expects the stock to move, often because of an earnings date or news inside the expiration window. The premium is high for a reason, and the reason is the part worth looking at.

How far out should I sell?

There's no single answer, and anyone who gives you one flatly is selling something. Shorter expirations decay faster and annualize better on paper but demand more management; longer ones collect more premium up front and lock up the shares longer. Run both through the calculator and compare the annualized columns.

Does this work for cash-secured puts?

Not as written, because the math here assumes you hold the shares. That is a different position with different arithmetic, so it gets its own cash secured put calculator.