Covered Call Yield Calculator
Model per share premium yield, two expiration scenarios, and break even for a covered call from your stock price, strike, premium, and days to expiration.
How the calculator works
Enter the stock price, call strike, premium received, and calendar days remaining. Each price is entered per underlying share, not per option contract. The calculation assumes a long stock position paired with one short call per matching share amount.
The annualized premium return divides premium by current stock value, then scales the holding period by 365 days. It is a simple rate calculation, not an annual percentage yield, forecast, or promise that the same premium can be earned repeatedly.
The called scenario assumes shares are sold at the strike and includes the premium. The not called scenario assumes the stock price is unchanged at expiration and the call expires without assignment. Break even subtracts the premium from the stock purchase price.
The premium can offset only part of a stock decline. A covered call caps gains above the strike if shares are assigned, while the stock can still fall substantially. Assignment can also happen before expiration.
Using the calculator
- Enter all stock and option prices per share, plus whole calendar days to expiration.
- Review annualized premium return, the two stated expiration scenarios, and break even.
- Change one input at a time to compare assumptions. The outputs are arithmetic scenarios, not trade instructions.
Worked example
Suppose the stock costs USD 50 per share, the call strike is USD 55 per share, the premium received is USD 1.25 per share, and 30 days remain. The simple annualized premium return on the entered stock value is 30.4167%.
If the shares are assigned at the USD 55 strike, the modeled return from the USD 50 stock purchase plus USD 1.25 premium is 12.5%. If the stock is unchanged at USD 50 at expiration and the call expires without assignment, the return is 2.5%. The break even stock price is USD 48.75 before fees and dividends.
When to use this calculator
Use it to check the arithmetic of premium relative to stock value, a sale at the strike, an unchanged stock price, and the premium based break even level.
Option Breakeven can compare payoff points for multi leg strategies. Black Scholes Pricer estimates a theoretical option value under its assumptions. Options Greeks Calculator shows modeled sensitivities. These tools answer different questions and do not predict assignment or returns.
Common input mistakes
Enter premium per share, not the full cash premium for a contract. Use consistent currency units for stock price, strike, and premium. The calculator does not convert currencies or multiply results by shares per contract.
Do not read the unchanged scenario as a forecast. It fixes the ending stock price at the input price. The assigned scenario fixes the sale price at the strike and excludes stock gains above it.
Formula
Simple annualized premium return (%) = premium ÷ current stock price × 365 ÷ days to expiration × 100
Return if assigned at strike (%) = (strike − current stock price + premium) ÷ current stock price × 100
Return if stock is unchanged at expiration (%) = premium ÷ current stock price × 100
Break even stock price = current stock price − premium
Stock price, strike, and premium are all per share. The annualized rate uses current stock value as its denominator and a 365 day year. The assigned scenario assumes sale at the strike. The unchanged and unassigned scenario is available only when the entered stock price is at or below the strike; an unchanged price above the strike is in the money and would normally be assigned. Results exclude fees, taxes, dividends, and any contract multiplier.
Assumptions and limitations
This is a static per share calculation for long stock and a matching short call. It does not model option pricing, changing stock prices during the holding period, early assignment timing, dividends, fees, taxes, bid and ask spreads, margin, or a specific contract multiplier. The stock can lose most or all of its value, and the premium does not remove that downside. Annualizing one premium does not imply that the same return can be repeated.
Key terms
- Covered call
- A position that owns underlying shares and sells a call option covering the same share amount.
- Break even stock price
- The entered stock purchase price minus premium received per share, before fees, taxes, or dividends.
- Simple annualized premium return
- Premium per share divided by current stock price, scaled by 365 days divided by days to expiration. It is not an annual percentage yield.
Related options tools
Use Option Breakeven to map expiration payoffs for multi leg positions, Black Scholes Pricer to estimate a theoretical option price, and Options Greeks Calculator to inspect modeled price sensitivities.
Those calculators use different inputs and assumptions. Compare their outputs only when the position, units, and time basis match the question you are checking.
FAQ
What position does this calculator model?
It models long stock paired with a short call covering the same number of shares. The premium is entered per share. The tool does not create or evaluate a full options order.
Why is annualized premium return based on stock price?
The tool divides the premium per share by the entered stock price per share, then scales by 365 divided by days to expiration. This gives a simple annualized rate on the stock value used in the model. It is not APY or a forecast of repeatable income.
What does return if assigned at the strike mean?
It assumes the stock is bought at the entered price, the premium is received, and the shares are sold for the strike price. Gains above the strike are excluded. Early assignment and actual expiration outcomes can differ from this scenario.
How should I read the unchanged stock scenario?
It assumes the stock ends at the same price entered and the call expires without assignment. The return is the premium divided by the original stock price. This scenario is unavailable when the unchanged price is above the strike, because that call is in the money and would normally be assigned.
Does the premium protect the stock from losses?
The premium offsets only its own amount of a stock decline. If the stock falls to zero, the loss in this simplified model is the purchase price less the premium, before fees and dividends.
Options context
The Options Industry Council describes a covered call as owning shares while writing a call for an equivalent amount. The premium provides a limited buffer against a decline, while gains are capped if shares are called away. Assignment may occur before expiration, including around an ex dividend date.