Covered Call Calculator
Visualize the profit and loss for any covered call position.
Option Parameters
Key Metrics
Enter parameters and click "Calculate P/L" to see results.
Enter parameters and calculate to view P/L chart
Free 160-Page Options Guide
Clear visuals and real examples for every essential concept.
What Is a Covered Call?
A covered call combines a long stock position with a short call option—you own 100 shares for each call you sell. It's a moderately bullish strategy with capped profits and substantial downside risk (though less than buying stock on its own). You collect a premium in exchange for limiting your upside if the stock rallies past the strike price. Learn more in our covered call guide.
If you want similar exposure with less capital, see the Poor Man's Covered Call Calculator—it uses a long call instead of shares.
Key Characteristics
- Max Profit: (Strike price − stock entry price + premium) × 100 × number of contracts. Achieved when the stock closes at or above the call strike at expiration.
- Max Loss: (Stock entry price − call sale price) × 100 × number of contracts. Occurs if the stock falls to $0.
- Breakeven: Stock entry price − call sale price
- Outlook: Moderately bullish, and willing to sell shares at the strike price
How to Read the P/L Chart
The cyan line (T+0) shows your theoretical P/L at trade entry. Before expiration, the curve is smoother because the call still has time value. As time passes, the short call loses extrinsic value—this time decay is the premium you're collecting as the option seller.
T+0 means "today plus 0 days," while T+30 would mean "today plus 30 days." It's a common convention for payoff diagrams that show multiple points in time.
The white line (Expiration) shows your profit or loss at expiration. If the stock is below the strike, the call expires worthless, and you keep both your shares and the full premium received for the calls. If the stock is above the strike, your profit is capped—your shares will be "called away" (sold) at the strike price. This payoff graph highlights the strategy's capped upside and stock-like downside risk.
The stock comparison line shows the P/L of holding shares without selling a call. If the stock rallies above the strike, the covered call underperforms since your profit is capped. But at every price below your strike, the covered call outperforms because the call premium received gives you a cushion of downside protection.
Using This Calculator
- Stock Price: The price of the stock at trade entry.
- Strike Price: The price at which you're obligated to sell your shares if assigned.
- Premium: The price at which you sell the call. To find your total credit, multiply the call sale price by 100 and by the number of contracts. For example, selling 5 calls at $2.50 each yields $2.50 × 100 × 5 = $1,250 in premium.
- Days to Expiration: How much time is left until the option expires.
- Implied Volatility: The market's expectation of future stock price movements, as implied by the stock's option prices.
The calculator also displays your cash requirement (cost of shares minus total premium received) and max return on capital (max profit ÷ cash requirement), which shows your potential return if your shares are called away.
Covered Call vs. Holding Stock
A covered call has capped upside but provides a lower breakeven than holding shares alone. If the stock rallies hard past the strike, you underperform—your shares get called away while a stock-only position keeps climbing. But if the stock stays flat or falls, the premium gives you a cushion that pure stockholders don't have. If you expect a big move higher, holding stock captures more upside. If you expect the stock to stay flat or rise modestly, the covered call offers better risk/reward.
A Note on Assignment
If the stock closes above the strike at expiration, your shares will be called away at the strike price. Your profit is the strike price minus your cost basis plus the premium received.
Early assignment is possible if the short call is deep ITM with little extrinsic value remaining, or there's an upcoming ex-dividend date in the stock and the call's extrinsic value is less than the dividend.
Learn More
For a deeper dive with detailed examples, strike selection guidance, and management techniques, read our comprehensive covered call guide.
Combine covered calls with cash-secured puts using the wheel strategy.
Related Calculators
- Cash Secured Put Calculator — Combine with a covered call to trade the wheel
- Poor Man's Covered Call Calculator — Capital-efficient alternative
- Long Call Calculator — Bullish counterpart
