- Net premium
- +$90
- Premium yield
- 1.80%
- Annualized
- 21.9%
- New adjusted basis
- $49.10
The call expires, you keep the shares and the premium, and your adjusted cost basis steps down. Most wheel sellers are aiming here.
Covered Call Calculator
Enter a position and read the premium yield, breakeven, downside cushion, and annualized return, plus what you make or lose in each of the three ways a covered call can end. Then practice the position in a turn-based simulator. Free, in the browser, no account.
Net premium +$90 $0.90 × 100 shares
Premium yield 1.80% 21.9% annualized · simple
Adjusted cost basis $49.10 $50.00 basis − $0.90 premium
Downside cushion 1.80% covers a drop to $49.10
If-called return 6.80% +$340 · 82.7% annualized
Capital at risk $5,000 100 shares × $50.00
The three ways it can end
- Stock P&L at strike
- +$250
- Premium
- +$90
- Total profit
- +$340
- If-called return
- 6.80% · 82.7% ann.
The shares are sold at the strike. You keep the premium plus every dollar of gain up to the strike, and none past it. That cap is what the premium paid you to accept.
- Breakeven
- $49.10
- Cushion
- 1.80%
- Stock P&L
- −$500
- Premium
- +$90
- Net
- −$410
- Uncovered, same drop
- −$500
Below breakeven the position loses money, just less than holding the stock alone. The premium is the cushion, not a shield.
For education only. This page runs on your inputs, not live market data, and nothing on it is investment advice.
Practice the position: a covered call simulator
Waiting a month to learn one lesson is the slow part of options paper trading. Here each turn is a full expiration cycle: sell a call, decide where the stock closes, settle, repeat. You practice the decisions that matter, and the ledger below builds the same cycle view the tracker builds from a broker, one turn at a time. Free, no account.
covered-call-simulator · practice position Day 0
Premium P&L ·
Equity P&L ·
Net P&L ·
Adjusted cost basis · Capital at risk · Days elapsed 0 Premium yield · Annualized so far ·
Set up the position
Same inputs as the calculator above, or press "Follow this position" up there to carry them over.
$
$
Sell a call
Holding 100 shares · stock at $50.00 · adjusted basis $50.00
$
$
Ballpark: 30 to 45 day calls near the money typically run 1 to 3% of the stock price. Approximate, not a quote.
Fast-forward to expiration
Short $52.50 call · 30 days · +$90 banked
Where does the stock close at expiration?
$
Called away at $52.50
Cycle closed
Premium P&L +$215
Equity P&L +$450
Net P&L +$665
Cycle yield 13.85% Annualized 56.2%
You built this ledger by hand. The tracker builds it from your broker, automatically, for every position.
See the wheel trackerIn a real wheel, this is where you would sell a cash secured put instead and let assignment hand the shares back. Follow the whole loop in the wheel strategy calculator.
Cycle ledger 0 rows
| Day | Action | Detail | Amount | Running premiumRunning |
|---|---|---|---|---|
| The ledger writes itself as you trade. Open a position to start. | ||||
Simulated prices are the ones you choose. For education only.
How the math works
Seven formulas produce everything on this page, and the same numbers work as an option premium calculator for any single call. This is a calculator, not a covered call screener: there are no live quotes here. Bring a strike and premium from your broker's chain and the math is instant. Each formula below carries its result for the page's default trade: a $50.00 stock, the $52.50 call at $0.90, 30 days, 100 shares.
Net premium
Net premium is the cash you collect the moment you sell the call.
net premium = premium per share × shares= +$90 At $0.90 per share on 100 shares, one contract's worth, you collect $90. It is yours no matter how the trade ends; what changes by outcome is everything else.
Premium yield
Premium yield measures the premium against the capital already in the shares.
premium yield = premium ÷ cost basis= 1.80% $0.90 of premium on a $50.00 basis is 1.80% for the 30 days the call is open. In buy-write mode the basis is the current stock price; in own-shares mode it is the basis you enter.
Simple annualized yield
Annualized yield restates one cycle's return at a full-year pace.
annualized = yield × 365 ÷ days to expiration= 21.9% 1.80% over 30 days annualizes to 21.9%. This is simple annualization: it scales linearly, does not compound, and assumes you could repeat the trade at the same terms, which markets do not promise. It is the honest way to compare a 30-day call with a 45-day one.
Breakeven and adjusted cost basis
Selling a call moves your breakeven down by the premium collected.
breakeven = cost basis − premium= $49.10 A $50.00 basis minus $0.90 of premium leaves an adjusted cost basis of $49.10, and that number is your breakeven. The stock can sit at $49.10 at expiration and the position is whole; every further call you sell pulls the number lower.
Downside cushion
Downside cushion is the premium expressed as a share of the current stock price.
cushion = premium ÷ stock price= 1.80% $0.90 on a $50.00 stock absorbs the first 1.80% of a decline. Past that, you are losing money, just less than you would holding the stock uncovered.
If-called return
If-called return is your total return when the stock closes above the strike and the shares are called away.
if-called return = (strike − basis + premium) ÷ basis= 6.80% Buy at $50.00, sell the $52.50 call for $0.90, get called: $2.50 of stock gain plus $0.90 of premium on $50.00 of basis is 6.80%, or $340 on one contract. If your basis sits above the strike, this number can be negative; the calculator shows the equity loss and the premium separately instead of hiding the split.
Capital at risk
Capital at risk is the money the position ties up: what the shares cost you.
capital at risk = cost basis × shares= $5,000 One contract's 100 shares at a $50.00 basis put $5,000 at risk. Every yield on this page is measured against that number, because a return only means something next to the capital that earned it.
One position, 90 days, three calls
The calculator prices one leg. Here is what a position looks like across three of them: an illustrative 90-day stretch in a stock we will call XYZ, starting from 100 shares owned at a $48.00 basis with the stock at $50.00. Capital at risk: $4,800. (Those shares were themselves assigned at $48.00 in the cash secured put calculator's example: same wheel, one leg earlier.)
| Day | Action | Detail | Amount | Running premiumRunning |
|---|---|---|---|---|
| 0 | Position | 100 shares @ $48.00 basis, price $50.00 | · | · |
| 0 | Sell call | 30D $52.50 strike @ $0.90 | +$90 | $90 |
| 30 | Expired | Stock $46.20 (drawdown) | · | $90 |
| 30 | Sell call | 30D $50.00 strike @ $0.55 | +$55 | $145 |
| 60 | Expired | Stock $49.40 | · | $145 |
| 60 | Sell call | 30D $52.50 strike @ $0.70 | +$70 | $215 |
| 90 | Called away | Stock $53.10, shares sold @ $52.50 | +$450 equity | $215 |
Premium P&L +$215
Equity P&L +$450 ($52.50 − $48.00) × 100
Net P&L +$665 90 days · 3 legs
Cycle yield 13.85% 56.2% annualized · rally ending included
Premium-only yield 4.48% 18.2% annualized · the income number
Adjusted cost basis $48.00 cost − $2.15 premium collected = $45.85 adjusted basis
Shares called at $52.50 against the $45.85 adjusted basis: $6.65 a share, the same +$665.
Leg 2 is the uncomfortable one, and it is in here on purpose. At day 30 the stock sits at $46.20, under water against the $48.00 basis, and the seller writes the $50.00 strike, above basis, for less premium. That is the drawdown dilemma every covered call seller eventually faces: accept a strike below basis for a bigger premium, or protect the basis and earn less. Our guide to selling covered calls for income covers how to make that call before the market makes it for you.
One more honest note: this is a single illustrative sequence, not typical results. The rally ending flatters the 56.2% annualized figure. The premium-only line, 4.48% over 90 days and 18.2% annualized, is the sober income number, which is why it gets equal billing above.
Covered call calculator FAQ
How do you calculate covered call returns?
Two numbers cover it. Premium yield is the premium divided by your cost basis: $0.90 of premium on a $50.00 basis is 1.80% for that cycle. If-called return adds the capped stock gain: (strike minus basis plus premium) divided by basis, which is 6.80% in the same example if the shares are called away at $52.50. Annualize either one with yield times 365 divided by days to expiration to compare trades of different lengths.
What is a good annualized return for covered calls?
There is no universal number, and an unusually high figure usually means the market is paying you for real risk. As a reference point, a 30 to 45 day call near the money often collects 1 to 3% of the stock price, which is roughly 12 to 36% simple annualized before any stock movement. The calculator shows the premium-only yield and the if-called return side by side, so you can see exactly what you are being paid to cap your upside.
What happens if my covered call expires in the money?
Your shares are sold at the strike price and you keep the premium. Your profit is the capped stock gain plus the premium: (strike minus basis plus premium) times shares. If your cost basis is above the strike, assignment realizes an equity loss that the premium may only partly offset; the called-away card above shows that split honestly rather than netting it away.
Does selling covered calls lower my cost basis?
Economically, yes. Each premium you keep lowers your adjusted cost basis, which is the price the stock has to hold for the position to break even. Collect $0.90 against a $50.00 basis and your adjusted basis is $49.10; keep selling calls and it steps down further. Tax accounting is a separate matter: premium from an expired call is generally reported as its own gain rather than an adjustment to the shares, so confirm treatment with a tax professional.
Why show premium and stock P&L separately?
Because they answer different questions. Premium P&L is income you have already banked by selling calls. Equity P&L is what the market is doing to the shares underneath. A position can be under water on the stock and still ahead overall because of premium, and you cannot see that from one blended number. If you track trades in a spreadsheet today, our covered call tracking spreadsheet guide shows the same three-number split.
Can I practice covered calls without real money?
Yes. The simulator on this page lets you manage a covered call position through as many expiration cycles as you want, free, with no account: sell a call, choose where the stock closes, settle, and watch the ledger and P&L build. It compresses a month into a click, so you learn position management fast. It does not place practice orders against a live option chain; for order-entry practice, most major brokers offer full paper trading accounts.
› Free tool · part of PremiumGuardHQ
This is the math for one trade.
The tracker does it across every cycle, automatically, from your broker: premium banked, basis reconciled through assignments, and the yield on every dollar you put at risk.
- Every cycle detected automatically
- Cost basis reconciled through assignments
- 14-day free trial