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Covered call calculator

You own the shares. What does writing a call against them actually pay, where does the position break even, and what happens if it gets assigned? Answers as you type, no signup.

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Premium collected
$115.00 on 1 contract
Breakeven
$42.95
Effective cost basis
$42.95
Profit if called away
$705.00
Total if called away
$5,115.00
Downside cushion
2.44%

Arithmetic on the numbers you type in. It does not see the market, does not know your account, and is not advice. Figures marked “if called away” describe what those inputs produce at assignment — they are not a forecast that assignment will happen, and options can also be assigned early.

What a covered call is

You already own at least 100 shares. You sell someone the right to buy them from you at a fixed price — the strike — before a set date, and they pay you a premium for that right. The premium is yours immediately and unconditionally.

What you give up is everything above the strike. If the stock runs well past it, your shares still get sold at the strike and you watch the rest go without you. That is the actual trade: income now in exchange for a ceiling. It is called “covered” because you own the shares to deliver; selling the same call without them is a different and far riskier position.

The formula

contracts        = floor( shares ÷ 100 )

premium collected = premium × contracts × 100

effective cost    = cost basis − premium
breakeven         = effective cost

profit if called  = ( strike − cost basis + premium ) × contracts × 100

downside cushion  = premium ÷ stock price

Contracts round down: 250 shares supports two contracts, not two and a half, and the odd 50 shares are simply not covered.

A worked example

You hold 100 shares bought at $44.10. The stock is now $47.20. You write one call at the $50 strike and collect $1.15 a share.

  • Premium collected: $1.15 × 100 = $115, yours right away
  • Effective cost basis: $44.10 − $1.15 = $42.95
  • If assigned at $50: ($50 − $44.10 + $1.15) × 100 = $705
  • Total received if assigned: $5,115
  • Downside cushion: $1.15 ÷ $47.20 = about 2.4%

Those are the calculator’s defaults, so the page loads showing this example. Note what the cushion is not: 2.4% is the fall the premium absorbs. Below that you are carrying the decline like any other shareholder.

The mistake worth naming

Writing a call at a strike below your cost basis. It is easy to do when a position is underwater and the premium further out looks too small to bother with. The cash lands immediately, which makes it feel like a free repair. But if the shares are called away at that strike, the position closes below what you paid — and whether the premium covers the gap is arithmetic, not a matter of hoping.

The calculator flags this case explicitly and shows the figure in red when the premium does not cover it. Nothing about the flag says the trade is wrong; there are reasons to accept a capped loss. It says only that the outcome should be a decision rather than a surprise.

Frequently asked questions

What happens if the stock finishes above the strike?

The call is exercised and your shares are sold at the strike price. You keep the premium and the gain up to the strike, and you do not participate in anything above it. This is the trade a covered call makes: certain income now in exchange for a cap on the upside. Being assigned is not a failure of the position — it is the outcome the strike was chosen to produce.

Why does writing a call below my cost basis lose money?

Because assignment sells your shares at the strike, and if that strike is below what you paid, the sale is at a loss. The premium offsets part of it and can sometimes cover it entirely — the calculator shows which, and flags the case where it does not. The premium arriving immediately is what makes this trap easy to walk into: the cash is real and visible, and the loss only shows up later at assignment.

Can I be assigned before expiration?

Yes. American-style equity options can be exercised by the holder at any point before expiry, and early assignment is most common just before an ex-dividend date when the dividend is worth more to the holder than the remaining time value. The figures on this page describe assignment whenever it happens; they do not assume you reach expiration.

What does the downside cushion actually protect against?

It is the percentage the stock can fall before the premium you collected stops covering the paper loss. It is a small buffer, not protection: a covered call still carries essentially all the downside of owning the shares. If the stock halves, a premium worth a couple of percent changes very little about that.

Why does it need 100 shares?

One standard equity option contract covers 100 shares. Writing a call against fewer than that would leave the position uncovered — a short call with no shares behind it, which carries unlimited risk and requires a different level of options approval at your broker. If you hold a number that is not a multiple of 100, the calculator writes contracts against the round lots and tells you how many shares are left over.

Related

A covered call caps the upside on shares you hold. Deciding how many shares to hold in the first place is the position size calculator. Both are on the tools page.

Running this repeatedly — sell a put, take assignment, sell calls against the shares, repeat — is the wheel, and it is one of the strategies available as a bot on the broker account you already have. What that costs is on the pricing page.

Options involve risk and are not suitable for every investor. A covered call caps your upside while leaving nearly all of the downside of owning the shares. This page is educational, is not financial advice or a recommendation, and predicts nothing. See the full risk disclosure.