Covered Call Return Calculator
Measure the income and if-called return on a covered call, annualised, plus the downside cushion the premium buys you.
How it works
Static return = premium ÷ cost · If-called return = (strike − cost + premium) ÷ cost · Annualised = return × 365 ÷ days
A covered call sells someone the right to buy shares you already own at the strike price, and you keep the premium either way. If the stock stays below the strike the option expires worthless and the premium is pure income — the static return. If the stock is called away you also capture the gain up to the strike, the higher if-called return. The premium additionally cushions a small drop, offsetting losses until the stock falls more than the premium you collected.
Worked example
Own stock at $100, sell a 30-day $105 call for $2. Static return is 2 ÷ 100 = 2% (about 24.3% annualised). If called, profit is 105 − 100 + 2 = $7, a 7% return (roughly 85% annualised). The $2 premium shields the first 2% of any decline.
Frequently asked questions
What is the difference between static and if-called return?
Static return assumes the stock finishes below the strike, so you keep only the premium. If-called return assumes it finishes above the strike and the shares are sold at the strike, adding the price appreciation up to the strike to the premium.
Why annualise the return?
A 2% return means very different things over 30 days versus a year. Annualising lets you compare covered calls of different lengths on a level footing — though it assumes you can keep repeating the trade at the same rate, which is not guaranteed.
What is the catch with covered calls?
You cap your upside: if the stock rockets past the strike, you still sell at the strike and miss the rest. The strategy trades away big gains for steady income and a small downside cushion.
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Educational estimate, not investment advice. Markets involve risk of loss.