What happens if my covered call is assigned?

You'll sell your 100 shares at the strike price. Your profit is the premium received plus any gain from your purchase price to the strike. You can then decide whether to buy back the shares.

How do I avoid assignment on a covered call?

You can buy back the call before expiration (at a loss or gain depending on stock price) or "roll" it by buying back and selling a new call at a later date and/or higher strike.

Is a covered call better than just holding stock?

Covered calls generate income but cap upside. They outperform in flat to slightly bullish markets but underperform when stocks surge. They're a tool for income and mild downside protection, not a replacement for stock ownership.

Covered Call Calculator

A covered call is an income-generating strategy where you own 100 shares of stock and sell a call option against those shares.

The premium collected from selling the call provides immediate income and reduces your cost basis. In exchange, you cap your upside if the stock rises above the strike price.

Covered calls are one of the most popular options strategies for investors who own stock and want to generate additional income while potentially selling at a target price.

The expiration calculator below includes both the shares and the short call. The general option-leg builder linked afterward does not include a stock holding in its position total.

Stock plus short call: expiration calculator

This hypothetical example holds 100 shares and sells one standard call against them. It includes the stock gain or loss.

Stock purchase price ($)Call strike ($)Premium received per share ($)Stock at expiration ($)

Expiration P/L: $500.00
Maximum P/L: $700.00
Maximum loss: $9,800.00
Breakeven: $98.00

P/L = 100 × (stock at expiration − purchase price + premium − call intrinsic value). This expiration-only calculation excludes fees, dividends, taxes, and early assignment. A later stock decline can overwhelm the premium received.

Open the option-leg builder

When to Use

You own shares and are willing to sell at the strike price
You want to generate income on existing positions
You're neutral to slightly bullish on the stock
Implied volatility is elevated (higher premiums)

Risk Profile

At expiration, before fees. Arithmetic examples below use their stated inputs, separately from the interactive model above.

Maximum ProfitPremium + (strike - purchase price) if called away

Maximum LossStock can go to zero minus premium received

BreakevenStock purchase price - premium received

How to Build a Covered Call

1Enter the purchase price per share for 100 shares
2Enter the strike of one short call
3Enter the premium received per share
4Change the assumed stock price at expiration to compare gains and losses
5Check breakeven and maximum loss; fees, dividends, and early assignment are excluded

Frequently Asked Questions

Choose a strike at or above the price you'd be happy to sell. ATM calls provide the most premium but will likely be called. OTM calls let you keep shares if the stock rises moderately while still collecting premium.

Learn More

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