How are HESM 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 HESM covered call priced from the end-of-day chain at a 30-day expiry (ATM IV 22.70%), the computed maximum profit is $297.00 per contract and the computed maximum loss is -$3,902.00 per contract. Live intraday quotes will differ as the chain moves through the trading session.

What is the breakeven for a HESM covered call?

The breakeven for the HESM covered call priced on this page is roughly $39.03 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 HESM market-implied 1-standard-deviation expected move is approximately 6.51%; if the move sits well outside the breakeven distance, the structure's risk-reward becomes correspondingly tighter.

How does current HESM implied volatility affect this covered call?

HESM ATM IV is at 22.70% with IV rank near 46.63%, 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.

HESM Covered Call Strategy

HESM (Hess Midstream LP), in the Energy sector, (Oil & Gas Midstream industry), listed on NYSE.

Hess Midstream LP owns, develops, operates, and acquires midstream assets. The company operates through three segments: Gathering; Processing and Storage; and Terminaling and Export. The Gathering segment owns natural gas gathering and compression; crude oil gathering systems; and produced water gathering and disposal facilities. Its gathering systems consists of approximately 1,350 miles of high and low pressure natural gas and natural gas liquids gathering pipelines with capacity of approximately 450 million cubic feet per day; and crude oil gathering system comprises approximately 550 miles of crude oil gathering pipelines. The Processing and Storage segment comprises Tioga Gas Plant, a natural gas processing and fractionation plant located in Tioga, North Dakota; a 50% interest in the Little Missouri 4 gas processing plant located in south of the Missouri River in McKenzie County, North Dakota; and Mentor Storage Terminal, a propane storage cavern and rail, and truck loading and unloading facility located in Mentor, Minnesota. The Terminaling and Export segment owns Ramberg terminal facility; Tioga rail terminal; and crude oil rail cars, as well as Johnson's Corner Header System, a crude oil pipeline header system.

HESM (Hess Midstream LP) trades in the Energy sector, specifically Oil & Gas Midstream, with a market capitalization of approximately $8.05B, a trailing P/E of 13.60, a beta of 0.52 versus the broader market, a 52-week range of 31.63-44.14, average daily share volume of 1.9M, a public-listing history dating back to 2017, approximately 176 full-time employees. These structural characteristics shape how HESM stock options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.

A beta of 0.52 indicates HESM has historically moved less than the broader market, dampening realized volatility and producing tighter expected-move bands per unit of dollar exposure. HESM pays a dividend, which adjusts put-call parity and shifts the ex-dividend pricing across the listed chain.

What is a covered call on HESM?

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 HESM snapshot

As of May 15, 2026, spot at $39.83, ATM IV 22.70%, IV rank 46.63%, expected move 6.51%. The covered call on HESM 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 98-day expiry.

Why this covered call structure on HESM specifically: HESM IV at 22.70% is mid-range versus its 1-year history, so the credit collected on a HESM covered call sits in line with its long-run distribution, with a market-implied 1-standard-deviation move of approximately 6.51% (roughly $2.59 on the underlying). The 98-day window matched to the front-month expiry keeps theta exposure bounded while still capturing the post-snapshot move; longer-dated HESM expiries trade a higher absolute premium for lower per-day decay. Position sizing on HESM should anchor to the underlying notional of $39.83 per share and to the trader's directional view on HESM stock.

HESM covered call setup

The HESM 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 HESM near $39.83, the first option leg uses a $42.00 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed HESM chain at a 98-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 HESM shares for the stock leg in covered calls and collars).

Action	Type	Strike / Basis	Premium (est)
Buy 100 shares	Stock	$39.83	long
Sell 1	Call	$42.00	$0.80

HESM covered call risk and reward

Net Premium / Debit: -$3,903.00
Max Profit (per contract): $297.00
Max Loss (per contract): -$3,902.00
Breakeven(s): $39.03
Risk / Reward Ratio: 0.076

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.

HESM covered call payoff curve

Modeled P&L at expiration across a range of underlying prices for the covered call on HESM. 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%	-$3,902.00
$8.82	-77.9%	-$3,021.45
$17.62	-55.8%	-$2,140.89
$26.43	-33.7%	-$1,260.34
$35.23	-11.5%	-$379.79
$44.04	+10.6%	+$297.00
$52.84	+32.7%	+$297.00
$61.65	+54.8%	+$297.00
$70.45	+76.9%	+$297.00
$79.26	+99.0%	+$297.00

When traders use covered call on HESM

Covered calls on HESM are an income strategy run on existing HESM stock positions; traders typically sell calls at 25-35 delta with 30-45 days to expiration to balance premium against upside cap.

HESM thesis for this covered call

The market-implied 1-standard-deviation range for HESM extends from approximately $37.24 on the downside to $42.42 on the upside. A HESM covered call collects premium on an existing long HESM position, trading off upside above the short call strike for immediate income; the short strike selection should reflect the trader's view on whether HESM will breach that level within the expiration window. Current HESM IV rank near 46.63% is mid-range against its 1-year distribution, so the IV signal is neutral; the covered call thesis on HESM should anchor more to the directional view and the expected-move geometry. As a Energy name, HESM options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to HESM-specific events.

HESM 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. HESM positions also carry Energy sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move HESM alongside the broader basket even when HESM-specific fundamentals are unchanged. Short-premium structures like a covered call on HESM carry tail risk when realized volatility exceeds the implied move; review historical HESM earnings reactions and macro stress periods before sizing. Always rebuild the position from current HESM chain quotes before placing a trade.

Frequently asked questions

What is a covered call on HESM?: A covered call on HESM is the covered call strategy applied to HESM (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 HESM stock trading near $39.83, the strikes shown on this page are snapped to the nearest listed HESM chain strike and the premiums come straight from the end-of-day bid/ask midpoint.
How are HESM 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 HESM covered call priced from the end-of-day chain at a 30-day expiry (ATM IV 22.70%), the computed maximum profit is $297.00 per contract and the computed maximum loss is -$3,902.00 per contract. Live intraday quotes will differ as the chain moves through the trading session.
What is the breakeven for a HESM covered call?: The breakeven for the HESM covered call priced on this page is roughly $39.03 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 HESM market-implied 1-standard-deviation expected move is approximately 6.51%; 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 HESM?: Covered calls on HESM are an income strategy run on existing HESM 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 HESM implied volatility affect this covered call?: HESM ATM IV is at 22.70% with IV rank near 46.63%, 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.