Covered Call Calculator
Covered call calculator. Premium income, breakeven, max profit and loss, static and if-called returns, for any contract size. The classic income-options strategy for stocks you already own.
Covered Call Calculator
How to use the covered call calculator
Enter your stock cost basis
Your average purchase price per share — from your broker statement, total cost ÷ shares owned. Every return on the page is measured against it. If you are buying the shares and writing the call together (a buy-write), enter today's price.
Choose the call strike price
Often out of the money — above the current share price. A strike close to the price earns more premium and is more likely to be assigned; a higher strike earns less and leaves more room for the shares to rise. The Options Industry Council's advice is that the strike plus the premium should be a price at which you would be content to sell.
Enter the call premium received
The price you collect for writing the call, per share, as the option chain quotes it. Use what you would actually receive — usually nearer the bid than the mid-point. The calculator multiplies it by the shares covered.
Set position size, contract size and days
A US equity option generally covers 100 shares; on HKEX the contract is a board lot that differs by stock (500 shares for Alibaba and Meituan). Shares beyond the last whole contract are shown as uncovered and left out of the figures. Days to expiration is used only to annualise the premium (× 365 ÷ days, simple, assuming you could collect the same premium again every period).
Read static vs called-away returns
Static return: what you earn if the stock stays below strike at expiry (you keep premium + still own shares). Return if called: what you earn if assigned (premium + the gain from cost to strike). The if-called return is deliberately not annualised — the gain to the strike happens once, not every month.
The covered call — income now, in exchange for the upside above the strike
A covered call pairs shares you own with a call option you sell on them — one contract per 100 shares for US equity options. You collect the premium now; in exchange, the buyer can take the shares off you at the strike price until the option expires. The Options Industry Council describes the trade as income plus a small downside cushion, paid for by giving up most of the shares' upside for as long as the call is open. Cboe's S&P 500 BuyWrite Index (BXM) measures a hypothetical version of it: hold the S&P 500 and sell a one-month, at-the-money index call, rolled on the third Friday of each month. Its 30-delta sibling, BXMD, sells a call further out of the money instead.
Why it works (and when it doesn't)
Covered calls profit when (a) the stock stays flat or rises modestly to strike — you keep premium + dividends + capital gain to strike, or (b) the stock drops modestly — premium softens the loss. The strategy underperforms buy-and-hold when the stock rallies sharply through the strike before expiry — you give up upside above strike + premium. This is the central trade-off: you sell future tail-upside in exchange for guaranteed current income. The arithmetic favours covered calls in flat or gently rising markets, costs them in strong rallies, and softens — but only by the premium — a fall.
Writing the call fixes your exit in advance at the strike plus the premium. Above that price the shares alone would have done better; below it, the premium is yours either way.
Strike + expiration selection
Two choices. Strike: an at-the-money strike earns the most time premium and is the likeliest to be assigned; an out-of-the-money strike earns less and leaves room for the shares to rise before they are called. The two Cboe benchmarks above bracket the choice — BXM sells at the money, BXMD sells the call whose delta is closest to 0.30. Expiration: shorter options are written more often and decay faster; longer ones collect more premium per trade but tie the shares up for longer. US monthly equity options expire on the third Friday. Whatever you choose, a call written 30 days or fewer before expiry is not a "qualified covered call" for US tax purposes (see the tax question below).
ASEAN covered call markets
Most ASEAN investors who write covered calls do it on US-listed shares through an international broker, where one contract is 100 shares. Hong Kong is the regional exception with a deep single-stock options market, and its contracts are not 100 shares: HKEX sizes each stock option in board lots, so a Tencent contract is 100 shares but an Alibaba or Meituan contract is 500 (HKEX's list of stock option classes, updated 5 October 2026). Set Shares per contract to match, or every total on the page is out by that factor. The arithmetic is otherwise the same in every market; tax treatment is not (see below).
Contract sizes, Cboe's buy-write benchmarks and how an assigned call is taxed
One contract per 100 shares in the US — Cboe's equity option specification says "generally, 100 shares". HKEX uses board lots instead: 500 shares for an Alibaba contract.
Cboe's BXM holds the S&P 500 and sells a one-month at-the-money call each third Friday; BXMD sells the call with delta closest to 0.30 instead.
The wheel alternates cash-secured puts (to buy the shares) with covered calls (to sell them), collecting a premium at each step.
Out-of-the-money strikes: less premium, more room for the shares to rise. At-the-money: the most time premium, and the likeliest to be assigned.
Maximum gain = strike − purchase price + premium; break even = purchase price − premium. Both are the Options Industry Council's definitions, and this calculator's.
US tax (IRS Publication 550): if the call expires, the premium is a short-term capital gain; if it is exercised, the premium is added to the amount realised on the shares.
The cushion is only the premium. The position loses money at expiry once the shares fall below cost minus premium; below that it falls dollar for dollar with the stock.
Early assignment is most likely the day before the stock goes ex-dividend, when the call holder exercises to collect the dividend.
A call written 30 days or fewer before expiry, or deep in the money, is not a qualified covered call under US tax rules, which brings the straddle rules into play.
This calculator annualises only the premium. The if-called return includes the shares' one-off gain to the strike, so multiplying it by twelve would describe a trade you cannot repeat.
Frequently asked questions
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Not inherently — if the strike is above your cost basis, being called away means you locked in capital gain + premium income. The only "regret" comes if the stock continues running above strike post-assignment. To avoid: pick longer-dated calls or higher strikes; or "roll up and out" before assignment (buy back the short call, sell a higher-strike longer-dated call simultaneously). Many writers accept assignment when it happens, take the gain, and start a new wheel.
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For covered calls: ITM (In-The-Money): strike below current stock price — high premium (mostly intrinsic value), near-certain assignment, "deep call-write" strategy. ATM (At-The-Money): strike ≈ current price — the most time premium, and roughly even odds of finishing in the money. OTM (Out-of-the-Money): strike above current price — lower premium, more room for the shares to rise, and less likely to be assigned. An option's delta is often used as a rough gauge of that likelihood, which is why Cboe's BXMD benchmark selects its calls by delta (closest to 0.30).
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Dividends are a key risk: if the stock's dividend on ex-date approaches or exceeds the call's time value, the call holder may exercise EARLY to capture the dividend (you'd be called away before expiry, losing the dividend you'd otherwise collect). The Options Industry Council names the day before the ex-dividend date as the exception to the rule that exercising early rarely pays. Check the ex-dividend calendar before each write, particularly on high-yield stocks.
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A combined cycle: (1) Cash-Secured Put: sell a put on a stock you want to own at a price below current. Collect premium. If assigned, you buy 100 shares at the put strike. (2) Covered Call: now that you own 100 shares, sell calls above your cost basis. Collect premium. If assigned, you sell shares at the call strike. (3) Repeat: with the sale proceeds, sell another CSP. The wheel collects a premium whether you hold the shares or the cash — and carries the full downside of the shares whenever you hold them.
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US tax treatment: Premium: not taxed when received. If the call expires worthless, premium becomes short-term capital gain (ordinary income tax rate) in the expiration year. If the call is assigned, premium is added to the stock sale proceeds for capital gain computation. Qualified covered calls: Publication 550 treats a call as qualified only if it is exchange-traded, written more than 30 days before expiry and not deep in the money. A call that fails those tests can make the shares and the call a straddle, with loss-deferral and holding-period consequences — consult a tax professional. Singapore: IRAS says gains from selling shares and other financial instruments are generally not taxable, being viewed as personal investments, but gains from trading can be taxed as income. Check how your own activity is likely to be viewed.
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Ideal characteristics: (a) Liquid options chain — tight bid-ask spreads, high open interest. SPY, QQQ, AAPL, MSFT, AMZN all qualify. (b) Moderate volatility — too low and the premium is small; too high and the premium is paying you to hold a stock that moves a lot. (c) Sideways or slowly trending stocks — you collect premium without missing big moves. (d) Dividend payers for total return enhancement. Worst candidates: pre-earnings volatile names (high IV but binary outcome risk), illiquid small-caps (wide spreads), pure momentum names (covered calls cap exactly what you bought them for).
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This calculator gives you the headline metrics — premium, breakeven, max profit, returns. A payoff diagram is a graphical view showing P&L at every possible stock price at expiration. For a covered call, the payoff is: linear loss below cost minus premium, kinked at strike (capped above strike at max profit). Both views complement each other — metrics for quick screening, payoff diagram for "what if stock moves N%" thinking. For multi-leg strategies (iron condor, butterfly), payoff diagrams become essential.
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Closing your current short call and opening a new one — usually further out in time and/or at a higher strike. Two common rolls: Roll up (higher strike, same expiry) — gives up some premium but raises the cap. Roll out (same strike, later expiry) — collects additional premium, extends time. Roll up and out (higher strike + later expiry) — most common defensive move when stock approaches strike. Rolling is most useful when the stock has rallied near your strike and you want to extend the position. Beware: rolling repeatedly can lock in increasing losses if the stock keeps running.
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No. Cost basis, strike, premium, days, share count — every input stays in your browser. The covered call computation runs as client-side JavaScript. Open DevTools → Network when you click Calculate and you'll see zero outbound requests.
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The Options Industry Council's strategy page "Covered Call (Buy/Write)" (optionseducation.org) gives the maximum-gain, maximum-loss and break-even definitions this calculator uses. The OCC's Characteristics and Risks of Standardized Options is the disclosure document on exercise and assignment. Cboe's BuyWrite Indices methodology documents BXM and BXMD. IRS Publication 550 covers the US tax treatment, and HKEX publishes the contract size of every stock option class. For a textbook treatment: McMillan, Options as a Strategic Investment.
Method & sources
How it computes
Whole contracts only (shares ÷ contract size, floored; default 100). In integer cents over the covered shares: premium; cost; max profit = strike − cost + premium; max loss = cost − premium; break-even = cost − premium per share (OIC definitions). Static return = premium ÷ cost; if-called = max profit ÷ cost. Only the premium is annualised (× 365 ÷ days, simple). RecaInvest.coveredCall.
What this tool implements
- Maximum gain, maximum loss and break-even are the Options Industry Council's definitions for a covered call (buy/write): strike − stock purchase price + premium; stock purchase price − premium; starting price − premium.
- Share count is floored to whole contracts, and fewer shares than one contract is refused: a call written against 50 shares is not covered. Shares beyond the last whole contract are shown as uncovered and left out of every figure.
- Contract size is an input, default 100 (Cboe: US equity options cover "generally, 100 shares"). HKEX sizes stock options in board lots — 500 shares for Alibaba and Meituan, 100 for Tencent on its list updated 5 Oct 2026 — so a fixed 100 mis-states every HKEX total.
- Money is summed in integer cents over the covered shares, so the printed cost, premium and profit lines add up exactly.
- Static and if-called returns are reported separately, for the period. Only the premium is also annualised (× 365 ÷ days, simple, assuming the same premium could be collected every period); the if-called return is not, because the gain from cost to the strike happens once.
- ⚠️ US equity options are American-style; the Options Industry Council names the day before an ex-dividend date as the usual exception to the rule that early exercise rarely pays. The calculator prices the position as held to expiry.
Sources
- Options Industry Council. Covered Call (Buy/Write) — maximum gain, maximum loss, break even, early assignment before an ex-dividend date: https://www.optionseducation.org/strategies/all-strategies/covere…
- Cboe Exchange. Equity Options Product Specifications — underlying "generally, 100 shares": https://www.cboe.com/exchange-traded-stock/equity-options-spec
- Cboe Global Indices. Cboe BuyWrite Indices Methodology — BXM (one-month at-the-money SPX calls, rolled on the third Friday) and BXMD (delta closest to 0.30): https://cdn.cboe.com/api/global/us_indices/governance/BXM_Methodo…
- Hong Kong Exchanges and Clearing. The List of Stock Option Classes Available for Trading (updated 5 October 2026) — contract sizes in shares: https://www.hkex.com.hk/Products/Listed-Derivatives/Single-Stock/…
- Internal Revenue Service. Publication 550 (2025), Investment Income and Expenses — writers of puts and calls; qualified covered call options: https://www.irs.gov/publications/p550
- Inland Revenue Authority of Singapore. Gains from sale of property, shares and financial instruments: https://www.iras.gov.sg/taxes/individual-income-tax/basics-of-ind…
What can make this go out of date
- Nothing is fetched. Cost, strike, premium, shares, contract size and days are all supplied by the reader; an option premium can move materially within a session.
Abridged — the full review record for this tool runs longer than the list above.
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