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.
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.
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 and income sheets add live data, trade journalling and tax estimates.