CMI Covered Call Strategy
CMI (Cummins Inc.), in the Industrials sector, (Industrial - Machinery industry), listed on NYSE.
Cummins Inc. is a global innovator in power solutions, responsible for the design, manufacturing, distribution, and maintenance of a broad array of diesel and natural gas engines, alongside cutting-edge electric and hybrid powertrains, and associated components. Its operations are strategically divided into five segments: Engine, Distribution, Components, Power Systems, and New Power. The company's extensive engine portfolio, available under the Cummins brand and others, powers a vast range of heavy and medium-duty applications, including commercial trucks, buses, recreational vehicles, light-duty automobiles, construction and mining equipment, marine vessels, railway systems, oil and gas operations, defense, and agriculture. Complementing these engines, Cummins provides both new and remanufactured parts and comprehensive servicing. Beyond its core engine offerings, Cummins delivers sophisticated power generation systems, high-horsepower engines, and specialized application engineering. It also offers custom-designed assemblies, retail and wholesale aftermarket components, and expert repair services conducted both in-shop and on-site.
CMI (Cummins Inc.) trades in the Industrials sector, specifically Industrial - Machinery, with a market capitalization of approximately $88.02B, a trailing P/E of 32.44, a beta of 1.25 versus the broader market, a 52-week range of 389.52-737.76, average daily share volume of 982K, a public-listing history dating back to 1947, approximately 67K full-time employees. These structural characteristics shape how CMI stock options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of 1.25 places CMI roughly in line with broader market moves, so the strategy payoff and realized volatility track the index-equivalent baseline. CMI pays a dividend, which adjusts put-call parity and shifts the ex-dividend pricing across the listed chain.
What is a covered call on CMI?
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.
CMI snapshot
As of August 14, 2026, spot at $631.75, ATM IV 32.70%, IV rank 35.19%, expected move 9.37%. The covered call on CMI below is built from the August 14, 2026 end-of-day chain, with strikes snapped to listed contracts and premiums pulled from the bid/ask midpoint at a 35-day expiry.
Why this covered call structure on CMI specifically: CMI IV at 32.70% is mid-range versus its 1-year history, so the credit collected on a CMI covered call sits in line with its long-run distribution, with a market-implied 1-standard-deviation move of approximately 9.37% (roughly $59.23 on the underlying). The 35-day window matched to the front-month expiry keeps theta exposure bounded while still capturing the post-snapshot move; longer-dated CMI expiries trade a higher absolute premium for lower per-day decay. Position sizing on CMI should anchor to the underlying notional of $631.75 per share and to the trader's directional view on CMI stock.
CMI covered call setup
The CMI covered call below is built from the August 14, 2026 end-of-day chain, with each option leg priced at the bid/ask midpoint of its listed strike. With CMI at $631.75 on that close, the first option leg uses a $660.00 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed CMI chain at a 35-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 CMI shares for the stock leg in covered calls and collars).
| Action | Type | Strike / Basis | Premium (est) |
|---|---|---|---|
| Buy 100 shares | Stock | $631.75 | long |
| Sell 1 | Call | $660.00 | $14.25 |
CMI covered call risk and reward
- Net Premium / Debit
- -$61,750.00
- Max Profit (per contract)
- $4,250.00
- Max Loss (per contract)
- -$61,749.00
- Breakeven(s)
- $617.50
- Risk / Reward Ratio
- 0.069
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.
CMI covered call payoff curve
Modeled P&L at expiration across a range of underlying prices for the covered call on CMI. 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% | -$61,749.00 |
| $139.69 | -77.9% | -$47,780.77 |
| $279.37 | -55.8% | -$33,812.54 |
| $419.06 | -33.7% | -$19,844.31 |
| $558.74 | -11.6% | -$5,876.08 |
| $698.42 | +10.6% | +$4,250.00 |
| $838.10 | +32.7% | +$4,250.00 |
| $977.79 | +54.8% | +$4,250.00 |
| $1,117.47 | +76.9% | +$4,250.00 |
| $1,257.15 | +99.0% | +$4,250.00 |
When traders use covered call on CMI
Covered calls on CMI are an income strategy run on existing CMI stock positions; traders typically sell calls at 25-35 delta with 30-45 days to expiration to balance premium against upside cap.
CMI thesis for this covered call
The market-implied 1-standard-deviation range for CMI extends from approximately $572.52 on the downside to $690.98 on the upside. A CMI covered call collects premium on an existing long CMI position, trading off upside above the short call strike for immediate income; the short strike selection should reflect the trader's view on whether CMI will breach that level within the expiration window. Current CMI IV rank near 35.19% is mid-range against its 1-year distribution, so the IV signal is neutral; the covered call thesis on CMI should anchor more to the directional view and the expected-move geometry. As a Industrials name, CMI options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to CMI-specific events.
CMI 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. CMI positions also carry Industrials sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move CMI alongside the broader basket even when CMI-specific fundamentals are unchanged. Short-premium structures like a covered call on CMI carry tail risk when realized volatility exceeds the implied move; review historical CMI earnings reactions and macro stress periods before sizing. Always rebuild the position from current CMI chain quotes before placing a trade.
Frequently asked questions
- What is a covered call on CMI?
- A covered call on CMI is the covered call strategy applied to CMI (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 CMI stock at $631.75 on the August 14, 2026 close, the strikes shown on this page are snapped to the nearest listed CMI chain strike and the premiums come straight from that session's bid/ask midpoint.
- How are CMI 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 CMI covered call priced from the August 14, 2026 end-of-day chain at a 30-day expiry (ATM IV 32.70%), the computed maximum profit is $4,250.00 per contract and the computed maximum loss is -$61,749.00 per contract. Live intraday quotes will differ as the chain moves through the trading session.
- What is the breakeven for a CMI covered call?
- The breakeven for the CMI covered call priced on this page is roughly $617.50 at expiration, derived from the August 14, 2026 end-of-day chain's premiums. Breakeven is the underlying price at which the strategy's P&L crosses zero ignoring transaction costs and assignment risk. The CMI market-implied 1-standard-deviation expected move in the same options snapshot is approximately 9.37%; 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 CMI?
- Covered calls on CMI are an income strategy run on existing CMI 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 CMI implied volatility affect this covered call?
- CMI ATM IV is at 32.70% with IV rank near 35.19%, which is mid-range against its 1-year history. Strategy selection depends more on directional thesis and expected move than on a strong IV signal.