Covered call calculator: break-even, cushion and the ceiling
Selling a call on shares you own pays you now and caps what you can make later. See both sides in numbers before you place it: where you break even, how much room you have, and what the ceiling costs you.
| Stock at expiry | Covered call result | Just holding the shares |
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How it works: you own 100 shares per contract and sell someone the right to buy them at the strike. Break-even = what you paid − the premium. Cushion = the premium as a share of your cost: how far the stock can fall before you're below what you paid. The most you can make if called away = (strike − cost + premium) × 100 per contract — a ceiling, because above the strike the shares are sold and any further rise isn't yours. The table shows the result at expiry only; fees and dividends are left out. This is an illustration of the math on your inputs, not a trade idea.
What the ceiling costs you
Look at the right-hand column. Above the strike, holding the shares beats the covered call, and the gap keeps growing. That's the trade you make: a known premium today for giving up the big moves. On a stock you'd be happy to sell at the strike, that's fine. On one you want to keep, it hurts. The full picture — when to sell the call, which strike, what to do if the stock runs — is in the covered call strategy, explained.
The cushion is small. The drop can be big.
In the example the premium covers a 3% fall. A stock can fall 20% in a week on bad news, and the premium barely dents that. The premium softens a drop; it doesn't stop one. That is why the covered call is one leg of a loop and not a free lunch — see the wheel strategy, explained for how the legs fit together, and keep each position small enough that one bad month is survivable.
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