acalculator

What is my covered call return?

Enter what you paid for the shares, the strike of the call you wrote and the premium you received. The calculator gives the most you can make if the shares are called away, the return, the break-even price, the most you can lose, and the profit or loss at any stock price on the expiration date.

Your numbers

Maximum profit (if called away)
$420.00

Buying at $68.00 and writing the $70.00 call for $2.20 gives at most $420.00 (6.18%) if the shares are called away.

Return if called away
6.18%
Premium return (downside cushion)
3.24%
Break-even price
$65.80
Maximum loss (stock at $0)
$6,580.00
Premium received
$220.00
Profit or loss at the expiration price
−$80.00
Return at the expiration price
−1.18%

Maximum profit (if called away): $420.00. Buying at $68.00 and writing the $70.00 call for $2.20 gives at most $420.00 (6.18%) if the shares are called away.

Profit or loss at expiration

The results are estimates for information only. They are not financial, tax, or legal advice. Check the numbers with your lender or a qualified professional before you decide. Terms of use

How to calculate

Computes the return, break-even price, maximum profit and maximum loss of a covered call (shares owned plus a call written on them), and the profit or loss at any stock price at expiration.

Example with the default inputs (Stock purchase price (per share) $68.00, Call strike price $70.00, Premium received (per share) $2.20, Contracts 1, Stock price at expiration $65.00): Buying at $68.00 and writing the $70.00 call for $2.20 gives at most $420.00 (6.18%) if the shares are called away.

Method: Per share at expiration: profit = min(S, K) − S₀ + P; maximum profit = K − S₀ + P; break-even = S₀ − P; maximum loss = S₀ − P. Times 100 shares per contract.

  • Every price is typed; no quote is looked up.
  • Each contract covers 100 shares that you own. The result is at expiration; commissions, taxes and dividends are not included.
  • Arithmetic is exact on the typed decimals; money rounds once to the cent and percents to 2 decimals.
  • This is an estimate, not investment advice.

Machine-readable copies: Markdown, JSON.

Worked examples

Each example is checked against the calculator on every build.

  1. Stock purchase price (per share) $68.00, Call strike price $70.00, Premium received (per share) $2.20, Contracts 1, Stock price at expiration $65.00 gives Maximum profit (if called away) $420.00, Return if called away 6.176471%, Premium return (downside cushion) 3.235294%, Break-even price $65.80, Maximum loss (stock at $0) $6,580.00, Premium received $220.00, Profit or loss at the expiration price -$80.00, Return at the expiration price -1.176471%.Source: U.S. Securities and Exchange Commission, Investor.gov, "An Introduction to Options – Investor Bulletin" (ABC at $68 and the ABC December 70 call at $2.20; one contract is 100 shares; the call writer must sell at the strike if the call is exercised). https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins-63; break even = starting stock price − premium received. https://www.optionseducation.org/strategies/all-strategies/covered-call-buy-write
  2. Stock purchase price (per share) $68.00, Call strike price $70.00, Premium received (per share) $2.20, Contracts 1, Stock price at expiration $80.00 gives Profit or loss at the expiration price $420.00, Return at the expiration price 6.176471%.Source: U.S. Securities and Exchange Commission, Investor.gov, "An Introduction to Options – Investor Bulletin" (ABC at $68 and the ABC December 70 call at $2.20; one contract is 100 shares; the call writer must sell at the strike if the call is exercised). https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins-63; break even = starting stock price − premium received. https://www.optionseducation.org/strategies/all-strategies/covered-call-buy-write: above the strike the gain stops at the maximum, (70 − 68 + 2.20) × 100 = 420
  3. Stock purchase price (per share) $58.00, Call strike price $60.00, Premium received (per share) $1.50, Contracts 2, Stock price at expiration $55.00 gives Maximum profit (if called away) $700.00, Break-even price $56.50, Maximum loss (stock at $0) $11,300.00, Profit or loss at the expiration price -$300.00, Premium received $300.00.Source: Break even = starting stock price − premium received. https://www.optionseducation.org/strategies/all-strategies/covered-call-buy-write

How it works

With the purchase price S₀ per share, the strike K, the premium P per share, n contracts (100 × n shares) and a stock price S at expiration:

  • Profit or loss at S = (the lower of S and K − S₀ + P) × 100 × n. Below the strike you keep the shares; at or above it they are sold at K.
  • Maximum profit = (K − S₀ + P) × 100 × n, for any S at or above K
  • Return if called away = (K − S₀ + P) ÷ S₀ × 100
  • Premium return = P ÷ S₀ × 100: the return if the stock ends at S₀
  • Break-even price = S₀ − P
  • Maximum loss = (S₀ − P) × 100 × n, if the stock falls to $0
  • Return at S = profit or loss at S ÷ (S₀ × 100 × n) × 100

Rules:

  • The purchase price and the strike are more than $0, the premium and the expiration price $0 or more, each up to $1 billion. Contracts are whole numbers from 1 to 1,000,000.
  • The break-even price shows only when it is above $0 and not above the strike. When the premium covers the whole purchase price, the position cannot lose, so the maximum loss is $0. When K − S₀ + P is below $0 (a strike far below the purchase price), even the best case is a loss, so there is no break-even.
  • The arithmetic is exact on the decimals you type. Money shows to the cent and percents to 2 decimals, with halves rounded up (away from 0).
  • A result too large for a 64-bit floating-point number gives no answer and a message. So does a result that is not $0 but too close to $0 for one (about 2.5 × 10⁻³²⁴ or less), so no output is ever a silent $0 (or 0%).

Assumptions

  • Every price is typed; nothing is looked up.
  • The result is at expiration. Early assignment, commissions, taxes and dividends are not included.

Worked examples by hand

ABC at $68 with the December 70 call at $2.20 (Investor.gov's numbers). One contract covers 100 shares.

  • Maximum profit = (70 − 68 + 2.20) × 100 = $420, a return of 4.20 ÷ 68 = 6.18% if called away.
  • Premium received = 2.20 × 100 = $220, a premium return of 2.20 ÷ 68 = 3.24%.
  • Break-even = 68 − 2.20 = $65.80. Maximum loss = 65.80 × 100 = $6,580.
  • If ABC ends at $65: (65 − 68 + 2.20) × 100 = −$80, a return of −80 ÷ 6,800 = −1.18%.
  • If ABC ends at $80, the shares are sold at $70: (70 − 68 + 2.20) × 100 = $420.

Two contracts. 200 shares bought at $58 with the 60 call written for $1.50. Maximum profit = (60 − 58 + 1.50) × 200 = $700. Break-even = 58 − 1.50 = $56.50. Maximum loss = 56.50 × 200 = $11,300. At $55: (55 − 58 + 1.50) × 200 = −$300.

Other questions people ask

What is a covered call?

A covered call is owning shares of a stock and selling (writing) a call option on them: 100 shares for each contract. You collect the premium now. In return, the buyer of the call can buy your shares at the strike price, so your gain above the strike goes to them.

How do I calculate covered call return?

If the shares are called away, the return is (strike − purchase price + premium) ÷ purchase price. Shares bought at $68 with a 70 call written for $2.20 return (70 − 68 + 2.20) ÷ 68 = 6.18%. If the stock ends where you bought it, you keep the premium: 2.20 ÷ 68 = 3.24%.

What is the break-even price of a covered call?

The purchase price minus the premium per share. At $68 − $2.20 = $65.80, the premium exactly makes up for the fall in the stock, so the position neither gains nor loses at expiration.

What are the maximum profit and the maximum loss?

The maximum profit is the strike minus the purchase price plus the premium, per share, reached when the stock ends at or above the strike. The maximum loss is the purchase price minus the premium, per share, if the stock falls to $0. Multiply each by 100 shares per contract.

What happens if the stock rises above the strike?

The call will most likely be exercised, and you must sell your shares at the strike. You keep the premium and the gain up to the strike, but not any rise above it. That capped upside is the price of the premium.

Can the shares be called away before expiration?

Yes. The buyer of a call on a U.S. stock can usually exercise it at any time before it expires, so you may be assigned early. This page works out the result at expiration and leaves out commissions, taxes and dividends.