# What is my covered call return?

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.

- Page: https://www.acalculator.org/finance/covered-call-calculator
- JSON spec: https://www.acalculator.org/finance/covered-call-calculator.json
- Version: d2134ea5a7cf

## Default answer

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.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| stock | Stock purchase price (per share) | What you paid for each share, or the share price when you wrote the call. |
| strike | Call strike price | The price at which the buyer of the call can buy your shares. |
| premium | Premium received (per share) | The price of the call, per share, that you received for writing it. |
| contracts | Contracts | How many calls you wrote. Each covers 100 shares, so you hold 100 shares per contract. |
| at | Stock price at expiration | A stock price on the expiration date, to see the profit or loss there. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| maxProfit | Maximum profit (if called away) | (Strike − purchase price + premium) × shares: the result when the stock ends at or above the strike. |
| calledReturn | Return if called away | (Strike − purchase price + premium) ÷ purchase price × 100. |
| premiumYield | Premium return (downside cushion) | Premium ÷ purchase price × 100: the return if the stock ends where you bought it. |
| breakEven | Break-even price | Purchase price − premium: the stock price at expiration where the position neither gains nor loses. |
| maxLoss | Maximum loss (stock at $0) | (Purchase price − premium) × shares: the loss if the stock falls to $0. |
| premiumIncome | Premium received | Premium per share × shares. |
| profit | Profit or loss at the expiration price | (The lower of the expiration price and the strike − purchase price + premium) × shares. |
| returnAt | Return at the expiration price | Profit or loss at the expiration price ÷ (purchase price × shares) × 100. |

## 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.

## Assumptions

- 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.

## Worked examples

1. stock = $68.00, strike = $70.00, premium = $2.20, contracts = 1, at = $65.00 gives maxProfit = $420.00, calledReturn = 6.176471%, premiumYield = 3.235294%, breakEven = $65.80, maxLoss = $6,580.00, premiumIncome = $220.00, profit = -$80.00, returnAt = -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 = $68.00, strike = $70.00, premium = $2.20, contracts = 1, at = $80.00 gives profit = $420.00, returnAt = 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 = $58.00, strike = $60.00, premium = $1.50, contracts = 2, at = $55.00 gives maxProfit = $700.00, breakEven = $56.50, maxLoss = $11,300.00, profit = -$300.00, premiumIncome = $300.00. Source: Break even = starting stock price − premium received. https://www.optionseducation.org/strategies/all-strategies/covered-call-buy-write.

## FAQ

### 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.

## Sources

- Options Industry Council, "Covered Call (Buy/Write)": long 100 shares and short 1 call; maximum gain = strike price − stock purchase price + premium received; maximum loss = stock purchase price − premium received; break even = starting stock price − premium received. https://www.optionseducation.org/strategies/all-strategies/covered-call-buy-write (retrieved 2026-10-18)
- U.S. Securities and Exchange Commission, Investor.gov, "An Introduction to Options – Investor Bulletin": the ABC December 70 call at $2.20 with ABC at $68; a contract generally represents 100 shares; the buyer may exercise at any time before expiration and the writer must sell at the strike. https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins-63 (retrieved 2026-10-18, read in a browser)