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Covered call calculator
Neutral to slightly bullish. Own 100 shares and sell a call against them.
What is a covered call?
A covered call collects premium while you hold stock. Upside is capped at the short call. Downside follows the shares, cushioned only by the credit. Best when you are willing to sell the stock at strike A.
Legs
- Own the underlying
- Sell a call at strike A
Live example on SPY
Covered Call
- 800C−112/18 · $2.14
- Long 100 shares at $755.53
With SPY at 755.53, on the Dec 18 expiration (49 days out): own 100 shares at $755.53 and sell 1 800 call. Net credit $214. Max profit $4,660.50; max loss $75,338.50. Breakeven at expiration: Above $753.40 (−0.3%).
Open this covered call in the calculator to move the strikes, change the date and implied volatility, and read profit and loss by price and date.
Questions
- What is a covered call?
- A covered call collects premium while you hold stock. Upside is capped at the short call. Downside follows the shares, cushioned only by the credit. Best when you are willing to sell the stock at strike A.
- When does a covered call make money?
- Neutral to slightly bullish. Own 100 shares and sell a call against them.
- What is the max profit of a covered call?
- Limited: there is a ceiling on what it can make. The calculator gives the figure for your strikes and expiration.
- What is the max loss of a covered call?
- Nearly unlimited: a large move against it can lose many times what it takes in. The calculator gives the figure for your strikes and expiration.
- How do I calculate a covered call's profit and loss?
- Open the covered call in the strategy calculator. It places the legs on a real expiration, and you can drag the strikes, change the date, and read profit and loss by price and date, with max profit, max loss, and the breakevens.