basicLow RiskNeutral / Mildly Bullish
Covered Call
Own 100 shares and sell a call against them to collect premium income — capping your upside.
What is a Covered Call?
You own 100 shares of a stock and sell 1 call option against them. The call buyer pays you a premium. If the stock stays below the strike at expiration, you keep the premium and your shares. If it rises above the strike, your shares get called away at that price — you still keep the premium, but miss out on further upside.
When to use it
Ideal when you're neutral-to-mildly bullish on a stock you already own. Great for generating income in flat or slow markets. Avoid when you're very bullish — you'll cap your gains.
Structure
Own 100 shares + sell 1 OTM call at your target exit price.
Key Metrics
Max Profit
(Strike − stock purchase price) + premium received. Capped at the strike.
Max Loss
Stock price goes to zero minus premium received. Same downside as owning stock.
Breakeven
Stock purchase price − premium received.
Greeks Profile
Net delta: less than stock alone (partially hedged). Theta: positive (you're the seller, time decay benefits you). Vega: negative.
Tips & Best Practices
- 1Sell calls at strikes you'd be happy selling your shares at.
- 230–45 DTE is the sweet spot for premium decay.
- 3Rolling the call forward (buy to close, sell next expiry) extends the income.
- 4Best done on stocks you'd hold regardless — not momentum names.
See it in action
Model a Covered Call with a real ticker. See the P&L chart, heatmap, and exact breakevens.
Open Covered Call Calculator →