CTSH Covered Call Strategy
CTSH (Cognizant Technology Solutions Corporation), in the Technology sector, (Information Technology Services industry), listed on NASDAQ.
Cognizant Technology Solutions Corporation functions as a global professional services firm, delivering a comprehensive suite of consulting, technology, and outsourcing solutions across North America, Europe, and other international markets. Its operations are structured into four primary divisions: Financial Services, Healthcare, Products and Resources, and Communications, Media and Technology. Within the Financial Services sector, Cognizant provides advanced services such as enhancing customer experiences, implementing robotic process automation (RPA), and leveraging analytics and artificial intelligence (AI) to address needs in areas like digital lending, fraud prevention, and modern payment systems. For its Healthcare clients, the company focuses on navigating industry shifts toward consumer-centric models, outcome-based agreements, and digital health initiatives, striving to deliver an integrated, seamless, and patient-focused omnichannel experience. Furthermore, Cognizant assists in optimizing operations across various functions, including clinical development, pharmacovigilance, manufacturing, claims management, enrollment procedures, membership administration, and billing processes. Its clientele in this domain spans healthcare providers, payers, and life sciences organizations, encompassing pharmaceutical, biotechnology, and medical device firms.
CTSH (Cognizant Technology Solutions Corporation) trades in the Technology sector, specifically Information Technology Services, with a market capitalization of approximately $18.97B, a trailing P/E of 8.57, a beta of 0.81 versus the broader market, a 52-week range of 38.97-87.03, average daily share volume of 9.3M, a public-listing history dating back to 1998, approximately 336K full-time employees. These structural characteristics shape how CTSH stock options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of 0.81 places CTSH roughly in line with broader market moves, so the strategy payoff and realized volatility track the index-equivalent baseline. The trailing P/E of 8.57 is on the value side, where IV often compresses outside event windows because forward growth expectations are already discounted into the share price. CTSH pays a dividend, which adjusts put-call parity and shifts the ex-dividend pricing across the listed chain.
What is a covered call on CTSH?
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 CTSH snapshot
As of June 30, 2026, spot at $38.84, ATM IV 48.40%, IV rank 84.86%, expected move 13.88%. The covered call on CTSH 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 17-day expiry.
Why this covered call structure on CTSH specifically: CTSH IV at 48.40% is rich versus its 1-year range, which favors premium-selling structures like a CTSH covered call, with a market-implied 1-standard-deviation move of approximately 13.88% (roughly $5.39 on the underlying). The 17-day window matched to the front-month expiry keeps theta exposure bounded while still capturing the post-snapshot move; longer-dated CTSH expiries trade a higher absolute premium for lower per-day decay. Position sizing on CTSH should anchor to the underlying notional of $38.84 per share and to the trader's directional view on CTSH stock.
CTSH covered call setup
The CTSH 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 CTSH near $38.84, the first option leg uses a $40.00 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed CTSH chain at a 17-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 CTSH shares for the stock leg in covered calls and collars).
| Action | Type | Strike / Basis | Premium (est) |
|---|---|---|---|
| Buy 100 shares | Stock | $38.84 | long |
| Sell 1 | Call | $40.00 | $1.18 |
CTSH covered call risk and reward
- Net Premium / Debit
- -$3,766.50
- Max Profit (per contract)
- $233.50
- Max Loss (per contract)
- -$3,765.50
- Breakeven(s)
- $37.67
- Risk / Reward Ratio
- 0.062
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.
CTSH covered call payoff curve
Modeled P&L at expiration across a range of underlying prices for the covered call on CTSH. 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% | -$3,765.50 |
| $8.60 | -77.9% | -$2,906.84 |
| $17.18 | -55.8% | -$2,048.17 |
| $25.77 | -33.7% | -$1,189.51 |
| $34.36 | -11.5% | -$330.85 |
| $42.94 | +10.6% | +$233.50 |
| $51.53 | +32.7% | +$233.50 |
| $60.12 | +54.8% | +$233.50 |
| $68.70 | +76.9% | +$233.50 |
| $77.29 | +99.0% | +$233.50 |
When traders use covered call on CTSH
Covered calls on CTSH are an income strategy run on existing CTSH stock positions; traders typically sell calls at 25-35 delta with 30-45 days to expiration to balance premium against upside cap.
CTSH thesis for this covered call
The market-implied 1-standard-deviation range for CTSH extends from approximately $33.45 on the downside to $44.23 on the upside. A CTSH covered call collects premium on an existing long CTSH position, trading off upside above the short call strike for immediate income; the short strike selection should reflect the trader's view on whether CTSH will breach that level within the expiration window. Current CTSH IV rank near 84.86% sits in the upper third of its 1-year distribution, which historically reverts; this raises the bar for premium-buying structures and lowers it for premium-selling structures on CTSH at 48.40%. As a Technology name, CTSH options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to CTSH-specific events.
CTSH 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. CTSH positions also carry Technology sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move CTSH alongside the broader basket even when CTSH-specific fundamentals are unchanged. Short-premium structures like a covered call on CTSH carry tail risk when realized volatility exceeds the implied move; review historical CTSH earnings reactions and macro stress periods before sizing. Always rebuild the position from current CTSH chain quotes before placing a trade.
Frequently asked questions
- What is a covered call on CTSH?
- A covered call on CTSH is the covered call strategy applied to CTSH (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 CTSH stock trading near $38.84, the strikes shown on this page are snapped to the nearest listed CTSH chain strike and the premiums come straight from the end-of-day bid/ask midpoint.
- How are CTSH 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 CTSH covered call priced from the end-of-day chain at a 30-day expiry (ATM IV 48.40%), the computed maximum profit is $233.50 per contract and the computed maximum loss is -$3,765.50 per contract. Live intraday quotes will differ as the chain moves through the trading session.
- What is the breakeven for a CTSH covered call?
- The breakeven for the CTSH covered call priced on this page is roughly $37.67 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 CTSH market-implied 1-standard-deviation expected move is approximately 13.88%; 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 CTSH?
- Covered calls on CTSH are an income strategy run on existing CTSH 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 CTSH implied volatility affect this covered call?
- CTSH ATM IV is at 48.40% with IV rank near 84.86%, which is elevated relative to its 1-year range. Premium-selling structures (covered call, cash-secured put, iron condor) generally look more attractive when IV rank is high; premium-buying structures (long call, long put, debit spreads) are more expensive in that regime.