Covered Call Option Calculator
neutralA covered call involves owning 100 shares of stock and selling a call option against them. You collect premium income while capping your upside at the strike price. It's one of the most popular options strategies for generating income.
Max Profit
(Strike Price − Stock Entry Price + Premium Received) × 100
Max Loss
(Stock Entry Price − Premium Received) × 100 — if stock goes to $0
Break Even
Stock Entry Price − Premium Received
When to Use a Covered Call
- You already own shares and want to generate income
- You are neutral to slightly bullish on the stock
- You are willing to sell your shares at the strike price
- You want to reduce your cost basis on the stock
Risks
- If the stock rises sharply above the strike, you miss out on gains (opportunity cost)
- If the stock drops significantly, the premium only partially offsets losses
- You still bear the full downside risk of owning the stock
How a Covered Call Works
A covered call is a two-part strategy: you own 100 shares of stock and simultaneously sell a call option against those shares. The call you sell obligates you to sell your shares at the strike price if the buyer exercises.
Example
Say you own 100 shares of AAPL at $195 and you sell the $205 call for $3.00 per share ($300 total).
Why Traders Love Covered Calls
Covered calls are the gateway to options selling. They generate consistent income, reduce cost basis, and work well in flat-to-slightly-bullish markets. The tradeoff is capped upside.