Covered Call
You own the shares, and you sell someone the right to buy them at a price you both name, by a date you both name. The premium is yours to keep whatever the stock does; if it finishes above that price the shares go at that price, and every dollar above it belongs to whoever bought the call.
| Stock price at expiration | What the trade makes | Money tied up | Return on it | Holding the shares alone |
|---|---|---|---|---|
| 42.00 | −802.60 | 9,600.00 | −8.36% | −1,200.00 |
| 46.00 | −2.60 | 9,600.00 | −0.03% | −400.00 |
| 48.00 | 397.40 | 9,600.00 | 4.14% | 0.00 |
| 50.00 | 797.40 | 9,600.00 | 8.31% | 400.00 |
| 57.00 | 797.40 | 9,600.00 | 8.31% | 1,800.00 |
The 9,600.00 never changes: it is what the shares cost, and it is the money at work in every row. The last two rows carry the same two figures on purpose — at 50.00 and at 57.00 the trade makes 797.40 either way, because above the strike the shares are called away and the extra seven dollars a share go to someone else. The premium buys 2.00 of cushion under your cost and costs you everything above 50.00.
The two columns nobody prints
Of the nine pages Google showed us for this word, seven are pages we could open that day. Every one of them is an explanation, and none of them prints the money the position ties up or a return on it. One of the seven runs its example on 100 shares bought at 200.00 and sells the 215 call for 2.00 — 20,000.00 of stock sitting there doing the work — and that figure never appears on the page. The premium does. The money the premium is being earned on does not.
Those two columns are the reason this page exists. A profit of 797.40 is neither good nor bad on its own; on 9,600.00 of stock it is 8.31%, and 8.31% is a number you can hold next to anything else you might have done with the same money. This is the only figure on the page that none of the seven prints, and it is the one worth arguing about.
The row at 57.00 is what the premium costs you
Holding the same 200 shares and doing nothing would have made 1,800.00 at 57.00. The covered call makes 797.40. The gap, 1,002.60, is the price of the 400.00 you were paid up front — you were paid 400.00 to give up 1,002.60, and whether that was a good deal depends entirely on what you thought the stock was going to do.
The two lines cross at 51.9870: below that price the covered call is ahead of doing nothing, above it you would have been better off leaving the shares alone. It is one division to find — 797.40 divided by 200 shares, added to your 48.00 cost — and no page we read prints it.
What actually happens at expiration
Two outcomes, and both of them keep the premium. Under the strike the call expires worthless: you still own the shares and you still have the money. Over the strike the shares are called away at the strike price, and you hand them over at 50.00 even if the market price is 57.00.
Assignment can also happen before expiration, and this page says nothing about that: every figure here is arithmetic at expiration, from four numbers you supply. What the shares are worth on the way there, and what the call is worth before it expires, are questions this page does not answer.
The break-even — a footnote, not the point
A covered call breaks even below what you paid for the shares, because the premium is a cushion rather than a cost. Two of the seven pages we read print the same formula in the same shape: the Options Industry Council's page has Break even = starting stock price – premium received, and Firstrade's has BEP: Stock Purchase Price - Premium Received. On the numbers here that is 48.00 − 2.00 = 46.0000.
Add the 2.60 of fees, spread over 200 shares, and it becomes 46.0130. That 0.0130 is the whole difference between our figure and theirs. It is worth printing once and worth nothing as an argument — a page that sells itself on a cent and a third of a cent is a page with nothing else to say — so it sits here, in the middle of the page, and the table at the top stays the point.
Run your own numbers
Every figure on this page is one example: 200 shares at 48.00, the 50.00 call at 2.00, 0.65 a contract each way. Your strike, your premium and your own fee will give you different rows. The options profit calculator prices the covered call along with three other shapes from the numbers you type, and prints the money each shape ties up and the return on it — which are the two columns above.
Questions people ask
What is a covered call, in plain language?You already own the shares, and you sell someone the right to buy them from you at a price you agree, by a date you agree. They pay you for that right. If the stock stays under the price, nothing happens and you keep both the shares and the money they paid you. If it finishes above, they buy your shares at the price you agreed. Either way the money they paid you is yours.
How much can you make on a covered call?The premium, plus the gain on the shares up to the strike, and nothing past it. On the example on this page - 200 shares bought at 48.00, the 50.00 call sold for 2.00, 0.65 a contract each way - the most it can make is 797.40: 400.00 of premium plus 400.00 of share gain, less 2.60 of fees. At 57.00 it still makes 797.40.
How much can you lose on a covered call?Almost as much as owning the shares outright, less the premium. Here the shares cost 9,600.00 and the premium gives back 400.00, so the trade breaks even at 46.0130 and loses 802.60 at 42.00. The premium is a cushion, not a floor: if the stock went to zero the loss would be 9,202.60, which is the 9,600.00 of stock less the 400.00 of premium, plus the 2.60 of fees.
What is the break-even on a covered call?Your cost per share minus the premium per share. Here 48.00 minus 2.00 is 46.0000 before fees, or 46.0130 once 2.60 of fees is spread over 200 shares. Two of the pages we read for this word print the same formula; this page adds the fee per share and says so in one line.
What happens if the stock finishes above the strike?The shares are called away. You sell them at the strike, not at the market price: at 57.00 the example still makes 797.40 and not a cent more, and at the end of it you no longer own the shares. You keep the premium either way.
Why does this page print the money tied up?Because the profit figure on its own cannot be compared with anything. 797.40 is neither good nor bad until you know it took 9,600.00 of stock to earn it. Across the seven pages we could read for this word, the premium is printed and the money it is earned on is not.
Does this page price the option or use the Greeks?No. There is no Black-Scholes, no implied volatility, and no delta, gamma, theta or vega on it. Everything here is arithmetic at expiration from the shares, the cost, the strike, the premium and the fee. For your own strike and premium, the options profit calculator runs the covered call along with a long call, a long put and a cash-secured put.
Where this page stops
Expiration only: no early assignment, no closing the call out before the date, and nothing about what the position is worth in between. One contract is treated as 100 shares. No dividends, no margin, no taxes, no broker's schedule — the 0.65 a contract is a placeholder you replace with your own, and the site does not claim it is what anyone charges. No option pricing, no implied volatility, no Greeks, no probability.
Two of the ten results Google showed for this word — the Investopedia entry and the discussion thread at number two — could not be opened on any of the three routes we tried. We make no claim about what they say or do not say. The seven we did read were read on 22 October 2026, and pages change. Nothing on this page is advice.
Related guides
- Options profit calculator — the covered call, a long call, a long put and a cash-secured put, priced at expiration from your own strike, premium, contract count and per-contract fee.
- Stock average calculator — what several buys of one stock cost you per share once commission is charged on each.
- Stock profit calculator — the round trip on shares, with the tax line and the commission line separate.
- Stock position size — how many shares a risk budget pays for before any option is involved.
- Adding to a position — several entries instead of one, and what it does to the average cost.