Covered Call Calculator
See what a covered call pays if the stock sits still, what it pays if your shares get called away, and where your breakeven and capped upside land. Nothing to sign up for — change any number and the results update immediately.
Premium collected
$40
On 100 shares
Static return
2.38%
If unchanged, over 30 days
Static annualized
29.0%
The repeatable part
If-called return
15.00%
Premium plus gain to strike
Breakeven
$15.60
Cost basis minus premium
Max effective sale
$18.40
Your upside is capped here
If the stock stays below $18.00: the call expires worthless, you keep $40 and your 100 shares, and you can write another call — 2.38% for 30 days, or about 29.0% annualized if you keep repeating it.
If it closes above $18.00: your shares are sold at $18.00. Adding the premium, your effective sale price is $18.40 — a 15.00% total return on your $16.00 basis. Past that price the extra gain isn't yours.
Downside: the premium cushions only 2.4% of a decline. Below $15.60 you're losing money on the position.
Why There Are Two Return Numbers
This is the part that trips people up, and most calculators don't explain it. A covered call has two completely different outcomes, so a single "return" figure would be meaningless.
- Static return = premium ÷ current price. What you make if the stock goes nowhere and you keep the shares. This is the recurring income — the number worth annualizing, because you can do it again next month.
- If-called return = (strike − cost basis + premium) ÷ cost basis. What you make if the shares are assigned away. It includes the one-time gain from your basis up to the strike.
We deliberately don't annualize the if-called figure. That gain happens once and ends the position — scaling it to a yearly rate produces a headline number that badly overstates what the strategy actually earns. If your basis is well below the strike, if-called return can look spectacular while the repeatable income is quite ordinary.
A Worked Example
This continues the example from the cash-secured put calculator. You sold a $16 put, the stock fell, and you were assigned 100 shares at a $16.00 cost basis. The stock now trades at $16.80. You sell one 30-day call at the $18 strike for $0.40.
| Premium collected | $40 | $0.40 × 100, yours immediately |
| Static return | 2.38% | $40 ÷ $1,680 current value |
| Static annualized | 28.98% | 2.38% × (365 ÷ 30) |
| If-called return | 15.00% | ($18 − $16 + $0.40) ÷ $16 |
| Breakeven | $15.60 | $16.00 basis − $0.40 |
| Max proceeds if assigned | $1,840 | $18 strike + $0.40, × 100 |
Three outcomes. Below $18 at expiration the call expires worthless, you keep the $40 and the shares, and you can write another call next month — that is the 2.38% doing the work, repeatedly. Above $18 the shares are called away for $1,840 total, which is a 15% return on your $1,600 basis in thirty days. Below $15.60 you are underwater, because the premium only cushions the first $0.40 of a decline.
Notice the two return figures point in different directions. The 15% if-called number is far larger, but it happens once and ends the position. The 2.38% is smaller and repeatable. Judging a covered call on the if-called figure alone is how people end up systematically selling their best positions.
Premium, Profit and Annualized Return Are Three Different Numbers
These get used interchangeably and they are not the same, which is why calculators that report a single "profit" figure are close to useless for deciding anything.
- Premium is the cash received — $40 above. It is yours the moment the trade fills and you keep it in every scenario.
- Profit depends on what the shares do, and includes the stock. A $40 premium against shares that fell $2 is a $160 loss, not a $40 profit.
- Annualized return scales the static return to a year so that a 30-day call and a 45-day call can be compared. It is a rate, not a forecast — it assumes you can repeat the trade all year at the same premium, and in a falling market you cannot.
The calculator above reports all three separately for exactly this reason. When someone says a covered call "paid 30%", ask which number they mean.
The Mistake This Page Is Really For
Selling a call at a strike below your cost basis. It happens constantly: the stock drops after assignment, the strikes near the money pay far better than the ones up at your basis, and the premium is tempting.
The trap is that assignment then sells your shares for less than you paid. The test is simple — strike + premium must exceed your cost basis. If it doesn't, you've arranged a guaranteed net loss in exchange for income, and the calculator flags it above.
Sometimes that's a deliberate choice to exit a position you no longer want. It should just never be an accident.
What This Page Can't Tell You
It prices one call. It can't tell you whether the premium is genuinely rich or merely large. A high premium usually means high implied volatility, and high IV usually means the market expects a big move — which is the same move that leaves you holding a falling stock, or watching a rally get capped at your strike.
Before writing a call, check IV rank, options liquidity, and whether earnings land before expiration. Our covered call screener runs those checks across 300+ tickers. If you're earlier in the cycle and still selling puts, the cash-secured put calculator is the other half of this one — and the wheel strategy calculator runs both legs as a single cycle.
Frequently Asked Questions
How do you calculate the return on a covered call?
There are two returns and they answer different questions. Static return is the premium divided by the current share price, and it is what you make if the stock does nothing and the call expires worthless. If-called return is the strike price minus your cost basis, plus the premium, divided by your cost basis — what you make if the shares get assigned away.
What is the difference between static return and if-called return?
Static return only counts the premium, so it is the recurring income you can expect to repeat month after month while you keep the shares. If-called return also includes any gain between your cost basis and the strike, which is a one-time event that ends the position. Comparing them tells you whether you are being paid mainly to wait or mainly to sell.
Should you sell a covered call below your cost basis?
Generally no. If the strike is below what you paid for the shares, assignment locks in a loss on the stock that the premium may not cover. Check whether the strike plus the premium exceeds your cost basis — if it does not, you are guaranteeing a net loss should the call be assigned.
What is the breakeven on a covered call?
Your cost basis minus the premium received. Selling a $0.40 call against shares bought at $16.00 lowers your breakeven to $15.60. The premium cushions a decline, but only by the amount collected — a covered call is not meaningful downside protection.
What happens if the stock goes above the strike price?
Your shares are sold at the strike, and you keep the premium. Your effective sale price is the strike plus the premium, and that is the maximum you can receive no matter how far the stock runs. Being assigned is not a failure — it is the planned outcome of the trade, and in the wheel strategy it returns you to cash to sell puts again.
Can you lose money selling covered calls?
Yes, from the shares rather than the option. If the stock falls, you own it all the way down and the premium only offsets the first part of the decline. The other cost is opportunity: if the stock rallies well past your strike, your upside is capped while a plain shareholder keeps all of it.
How do you annualize a covered call return?
Take the static return and multiply by 365 divided by the days to expiration. A 2.38% premium over 30 days annualizes to about 29%. Annualize the static return only, never the if-called return: the gain from your cost basis up to the strike happens once and closes the position, so scaling it to a yearly rate produces a number the strategy cannot actually repeat.
Is this covered call calculator free?
Yes. Every figure on this page is computed in your browser, there is no signup, no account and no limit on how many scenarios you run. Nothing you type is sent anywhere.
What is the difference between covered call premium and profit?
Premium is the cash you receive for selling the call, and you keep it in every scenario. Profit is the premium combined with what the shares did, so a position can collect premium and still lose money if the stock falls further than the premium received. This calculator reports them separately because a single profit figure hides which half of the trade is working.
How many shares do you need to sell a covered call?
One hundred per contract. Each option contract covers 100 shares, so 250 shares supports two covered calls with 50 shares left over. The calculator takes a contract count and scales the dollar figures accordingly.
Want this as a spreadsheet?
Free Google Sheets version with all three calculators — cash-secured put, covered call, and the full wheel cycle — so you can model trades offline and keep your own copy.
Single-trade math only. The screener sheet adds live quotes and scoring across 300+ tickers, and the income tracker adds trade journalling and tax estimates.