ALRM Covered Call Strategy
ALRM (Alarm.com Holdings, Inc.), in the Technology sector, (Software - Application industry), listed on NASDAQ.
Alarm.com Holdings, Inc. provides cloud-based solutions for smart residential and commercial properties in the United States and internationally. It operates in two segments, Alarm.com and Other. The company provides interactive security solutions to control and monitor their security systems, as well as connected security devices, including door locks, motion sensors, door locks, garage doors, Internet of Things, thermostats, and video cameras; and video monitoring solutions, such as video analytics, live streaming, video doorbell, video clips, video alerts, continuous high definition recording, and commercial video surveillance solutions. It also offers intelligent automation and energy management solutions comprising scenes button; smart thermostat schedules; responsive savings; precision comfort; energy usage monitoring; heating, ventilation, and air conditioning monitoring services; whole home water safety solutions; geo-services; and demand response programs. In addition, the company provides commercial solutions, such as daily safeguards, commercial grade video, energy savings, protection for valuables and inventory, temperature monitoring, multi-site management and access control, early identification, simple to use, professionally supported, and easy to maintain. Further, it offers service provider solutions, including a permission-based online portal that offers account management, sales, marketing, training, and support tools; sales, marketing, and training services; and home builder programs, as well as wellness solutions.
ALRM (Alarm.com Holdings, Inc.) trades in the Technology sector, specifically Software - Application, with a market capitalization of approximately $2.09B, a trailing P/E of 16.38, a beta of 0.79 versus the broader market, a 52-week range of 41.49-60.25, average daily share volume of 482K, a public-listing history dating back to 2015, approximately 2K full-time employees. These structural characteristics shape how ALRM stock options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of 0.79 places ALRM roughly in line with broader market moves, so the strategy payoff and realized volatility track the index-equivalent baseline.
What is a covered call on ALRM?
A covered call pairs long stock with a short out-of-the-money call, collecting premium and capping upside above the short strike in exchange for income.
Current ALRM snapshot
As of May 15, 2026, spot at $42.54, ATM IV 41.30%, IV rank 13.65%, expected move 11.84%. The covered call on ALRM below is built from the same end-of-day chain, with strikes snapped to listed contracts and premiums pulled from the bid/ask midpoint at a 217-day expiry.
Why this covered call structure on ALRM specifically: ALRM IV at 41.30% is on the cheap side of its 1-year range, which means a premium-selling ALRM covered call collects less credit per unit of strike-width risk, with a market-implied 1-standard-deviation move of approximately 11.84% (roughly $5.04 on the underlying). The 217-day window matched to the front-month expiry keeps theta exposure bounded while still capturing the post-snapshot move; longer-dated ALRM expiries trade a higher absolute premium for lower per-day decay. Position sizing on ALRM should anchor to the underlying notional of $42.54 per share and to the trader's directional view on ALRM stock.
ALRM covered call setup
The ALRM covered call below is built from the end-of-day chain, with each option leg priced at the bid/ask midpoint of its listed strike. With ALRM near $42.54, the first option leg uses a $45.00 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed ALRM chain at a 217-day expiry; the cross-strike IV skew is reflected directly in the per-leg values rather than approximated. Quantity sizing assumes one contract per option leg (or 100 ALRM shares for the stock leg in covered calls and collars).
| Action | Type | Strike / Basis | Premium (est) |
|---|---|---|---|
| Buy 100 shares | Stock | $42.54 | long |
| Sell 1 | Call | $45.00 | $4.53 |
ALRM covered call risk and reward
- Net Premium / Debit
- -$3,801.50
- Max Profit (per contract)
- $698.50
- Max Loss (per contract)
- -$3,800.50
- Breakeven(s)
- $38.02
- Risk / Reward Ratio
- 0.184
Max profit equals short-strike minus cost basis plus premium times 100; max loss is cost basis minus premium (at zero). Breakeven is cost basis minus premium.
ALRM covered call payoff curve
Modeled P&L at expiration across a range of underlying prices for the covered call on ALRM. Each row is one sampled price point from the computed payoff curve; the full curve uses 200 price points internally before being summarized into 10 rows here.
| Underlying Price | % From Spot | P&L at Expiration |
|---|---|---|
| $0.01 | -100.0% | -$3,800.50 |
| $9.41 | -77.9% | -$2,860.03 |
| $18.82 | -55.8% | -$1,919.56 |
| $28.22 | -33.7% | -$979.08 |
| $37.63 | -11.5% | -$38.61 |
| $47.03 | +10.6% | +$698.50 |
| $56.44 | +32.7% | +$698.50 |
| $65.84 | +54.8% | +$698.50 |
| $75.25 | +76.9% | +$698.50 |
| $84.65 | +99.0% | +$698.50 |
When traders use covered call on ALRM
Covered calls on ALRM are an income strategy run on existing ALRM stock positions; traders typically sell calls at 25-35 delta with 30-45 days to expiration to balance premium against upside cap.
ALRM thesis for this covered call
The market-implied 1-standard-deviation range for ALRM extends from approximately $37.50 on the downside to $47.58 on the upside. A ALRM covered call collects premium on an existing long ALRM position, trading off upside above the short call strike for immediate income; the short strike selection should reflect the trader's view on whether ALRM will breach that level within the expiration window. Current ALRM IV rank near 13.65% sits in the lower third of its 1-year distribution, where IV often re-expands toward the mean; this favors premium-buying structures and disadvantages premium-selling structures on ALRM at 41.30%. As a Technology name, ALRM options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to ALRM-specific events.
ALRM covered call positions are structurally neutral to slightly bullish; the modeled P&L assumes European-style exercise at expiration and ignores early assignment, transaction costs, dividends paid before expiry on the stock leg (when present), and the bid-ask spread on the listed chain. ALRM positions also carry Technology sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move ALRM alongside the broader basket even when ALRM-specific fundamentals are unchanged. Short-premium structures like a covered call on ALRM carry tail risk when realized volatility exceeds the implied move; review historical ALRM earnings reactions and macro stress periods before sizing. Always rebuild the position from current ALRM chain quotes before placing a trade.
Frequently asked questions
- What is a covered call on ALRM?
- A covered call on ALRM is the covered call strategy applied to ALRM (stock). The strategy is structurally neutral to slightly bullish: A covered call pairs long stock with a short out-of-the-money call, collecting premium and capping upside above the short strike in exchange for income. With ALRM stock trading near $42.54, the strikes shown on this page are snapped to the nearest listed ALRM chain strike and the premiums come straight from the end-of-day bid/ask midpoint.
- How are ALRM covered call max profit and max loss calculated?
- Max profit equals short-strike minus cost basis plus premium times 100; max loss is cost basis minus premium (at zero). Breakeven is cost basis minus premium. For the ALRM covered call priced from the end-of-day chain at a 30-day expiry (ATM IV 41.30%), the computed maximum profit is $698.50 per contract and the computed maximum loss is -$3,800.50 per contract. Live intraday quotes will differ as the chain moves through the trading session.
- What is the breakeven for a ALRM covered call?
- The breakeven for the ALRM covered call priced on this page is roughly $38.02 at expiration, derived from end-of-day chain premiums. Breakeven is the underlying price at which the strategy's P&L crosses zero ignoring transaction costs and assignment risk. The current ALRM market-implied 1-standard-deviation expected move is approximately 11.84%; if the move sits well outside the breakeven distance, the structure's risk-reward becomes correspondingly tighter.
- When should you consider a covered call on ALRM?
- Covered calls on ALRM are an income strategy run on existing ALRM stock positions; traders typically sell calls at 25-35 delta with 30-45 days to expiration to balance premium against upside cap.
- How does current ALRM implied volatility affect this covered call?
- ALRM ATM IV is at 41.30% with IV rank near 13.65%, which is on the low end of its 1-year range. Premium-buying structures (long call, long put, debit spreads) are relatively cheap in this regime; premium-selling structures collect less credit per unit risk.