Work out what a covered call (buy-write) can earn. Enter the stock price, the strike and premium of the call you sell, and the days to expiration to get the if-called return, static return, annualized yield, breakeven price and a profit/loss chart against simply holding the stock.
Last updated:
Stock
$
Price you buy the shares at
100 shares per contract
Call you sell
$
$
$
Only if the ex-date falls before expiry
$
For the whole position
Calculate return on
Enter your values to see the result.
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How to use the Covered Call Calculator
Enter the stock price you buy at (or your cost) and the number of shares, 100 per contract.
Enter the call strike, the premium per share and the days to expiration.
Add dividends expected before expiration and your total fees.
Choose the return basis: net debit (stock minus premium) or stock cost.
Press Calculate returns to see if-called and static returns, breakeven and the P/L chart.
Covered call formulas
S = stock price, K = strike, C = premium per share, D = dividends per share before expiration, n = shares, t = days to expiration.
Net debit = (S − C) × n + fees
If-called profit = (K − S + C + D) × n − fees
If-called return = if-called profit ÷ net debit
Static return = (C + D) × n − fees, divided by net debit (for an out-of-the-money call)
Annualized return = return × 365 ÷ t
Breakeven = S − C − D (plus fees per share)
Example: buy 100 shares at $50 and sell a 30-day $52.50 call for $1.20. Net debit is $4,880. If called, profit is (2.50 + 1.20) × 100 = $370, a 7.58% return (92.2% annualized). If the stock stays at $50, you keep $120, a 2.46% static return. Breakeven is $48.80.
Choosing a strike: the trade-off
Strike vs. stock
Premium
Upside kept
Downside protection
Chance of assignment
In the money (below price)
Highest
None, gives up some
Largest
High
At the money
High time value
Little
Moderate
About even
Out of the money (above price)
Lower
Up to the strike
Smaller
Lower
Practical tips
Compare annualized numbers. A weekly call paying 0.6% and a monthly call paying 2% are easier to compare once both are annualized.
Mind the ex-dividend date. Owners of in-the-money calls often exercise the day before it to capture the dividend.
Only write calls on shares you are happy to sell at the strike; otherwise choose a higher strike or skip the trade.
Rolling (buying back the call and selling a later one) can extend the trade but resets the math; recalculate with the new premium and days.
Taxes: premiums and the resulting stock sale have their own holding periods; check how assignment affects your gains.
Frequently asked questions
How do you calculate a covered call return?
If-called return = (strike − stock price + premium + dividends − fees) ÷ net investment, where net investment is stock cost minus premium. Buying at $50, selling a $52.50 call for $1.20: (2.50 + 1.20) ÷ 48.80 = 7.58% if the shares are called away.
What is the static return on a covered call?
Static return assumes the stock price is unchanged at expiration: (premium + dividends − fees) ÷ net investment. For an out-of-the-money call you keep the shares and the premium, so in the example above it is 1.20 ÷ 48.80 = 2.46%.
How is the annualized return calculated?
Simple annualized return = period return × 365 ÷ days to expiration. A 2.46% static return in 30 days annualizes to about 29.9%. The compounded figure assumes you could repeat the same trade all year, which rarely happens exactly.
What is the breakeven on a covered call?
Breakeven = stock price − premium − dividends per share. Selling a $1.20 call against a $50 stock lowers breakeven to $48.80, which is 2.4% of downside protection. Below that, the position loses money just like the stock.
What is the maximum profit on a covered call?
Maximum profit = (strike − stock price + premium) × shares, plus dividends and minus fees. It is reached at any stock price at or above the strike, because the shares are sold at the strike.
What are the risks of covered calls?
You keep almost all of the downside of the stock while capping the upside at the strike. A deep in-the-money call can be assigned early, often right before an ex-dividend date. Premium is generally taxed as a short-term gain when the option expires or is closed.
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