Covered call calculator with fees

What a covered call calculator shows

A covered call is 100 shares of a stock and one call option sold on those shares. You receive the premium now. In return, the buyer of the call can buy your shares at the strike price until the expiry date.

This calculator shows the result at expiry and uses two cases. If the stock closes above the strike, the shares are called away and you sell them at the strike. If the stock closes at or below the strike, the call expires and you keep the shares. In practice, exercise near the strike is not certain.

• Breakeven is the stock price at expiry where the position has no profit and no loss after fees.
• Maximum profit if called is the profit when you sell the shares at the strike. The position cannot make more than this at expiry.
• Return if called is that profit as a percentage of the net cost.
• Return if not called is the premium after fees as a percentage of the net cost. It assumes that the stock closes at the stock price that you entered.
• Downside protection is how far the stock can fall, in percent, before the position has a loss.

How the calculation works

The premium lowers the money that you put into the position. The fees to sell the call raise it. The result is the net cost. Each return uses the net cost as its base.

• Net cost = stock price × shares − premium × shares + fees to sell
• Breakeven = net cost ÷ shares
• Profit if called = strike × shares − assignment fees − net cost
• Return if called = profit if called ÷ net cost
• Return if not called = (premium × shares − fees to sell) ÷ net cost
• Downside protection = (premium × shares − fees to sell) ÷ (stock price × shares)

Assignment fees apply only when the shares are called away. So they change the profit if called, but not the breakeven or the return if not called.

Example: strike above the stock price Synthetic example

Buy 200 shares at $50.00. Sell 2 calls with a $52.00 strike for $1.25 per share. The broker charges $0.65 per contract to sell the calls and no assignment fee.

Example: strike below the stock price Synthetic example

Buy 100 shares at $50.00. Sell 1 call with a $48.00 strike for $2.90 per share, with the same fees. The call is in the money, so the shares are likely called away if the price stays the same.

Why the two examples differ

The call with the lower strike pays more premium. So its downside protection is 5.79%, against 2.49% for the higher strike. But it caps the sale price at $48.00, below the stock price. Its return if called is 1.90%, against 6.65%.

The calculator shows no return if not called for the lower strike. At an unchanged stock price, that call is in the money, so the shares are likely called away.

How fees change the result

In the first example, the fees to sell the calls are $1.30. They move the breakeven from $48.75 to $48.7565. On a premium of $250.00, that change is small.

Fees matter more on a small premium. Buy 100 shares at $20.00 and sell 1 call with a $21.00 strike for $0.15 per share. The premium is $15.00, and the fee of $0.65 takes 4.33% of it. The return if not called falls from 0.76% to 0.72%.

An assignment fee changes only the called case. With an assignment fee of $15.00 per order, the profit if called falls from $114.35 to $99.35. Check your broker's fee schedule for this fee.

Common questions

Why is the return based on the net cost?

The net cost is the money that the position needs after the premium. For a return on the stock cost instead, divide the profit if called by the stock cost in the arithmetic steps.

Is the downside protection the same as the breakeven?

They give the same information in two forms. The breakeven is a price. The downside protection is the fall from the stock price to the breakeven, as a percentage of the stock price.

Does the calculator annualize the return?

No. Each return applies to the period until expiry. A return over 30 days and a return over 90 days are not directly comparable.

What if the shares are called away before expiry?

An American-style call can be exercised on any day before expiry. If that happens, you sell the shares at the strike and keep the premium. Without dividends, the profit if called is the same, but you receive it earlier.

I already own the shares. Which stock price should I enter?

Enter your purchase price to see the result on your original cost. Enter today's price to see the result on the money that the shares are worth now.

How does this compare with buying a call?

A long call has a different profit shape. Use the options breakeven calculator for long calls and long puts.

Limits of this result

• It applies at expiry, or at an earlier assignment. It does not price the call before then.
• It does not include dividends, taxes, bid–ask spreads, or slippage.
• It does not include stock commissions. Add a commission to buy the shares to the fee per order to sell the call. Add a commission to sell them to the assignment fee per order.
• It assumes that one contract covers the number of shares per contract that you enter.
• It is arithmetic for your inputs. It is not investment advice.

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