KNOP Covered Call Strategy
KNOP (KNOT Offshore Partners LP), in the Industrials sector, (Marine Shipping industry), listed on NYSE.
KNOT Offshore Partners LP owns, acquires, and operates shuttle tankers under long-term charters in the North Sea and Brazil. The company provides loading, transportation, discharge, and storage of crude oil under time charters and bareboat charters. As of March 17, 2022, it operated a fleet of seventeen shuttle tankers. The company was founded in 2013 and is headquartered in Aberdeen, the United Kingdom.
KNOP (KNOT Offshore Partners LP) trades in the Industrials sector, specifically Marine Shipping, with a market capitalization of approximately $362.9M, a trailing P/E of 15.61, a beta of -0.08 versus the broader market, a 52-week range of 6.16-11.55, average daily share volume of 109K, a public-listing history dating back to 2013, approximately 1 full-time employees. These structural characteristics shape how KNOP stock options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of -0.08 indicates KNOP has historically moved less than the broader market, dampening realized volatility and producing tighter expected-move bands per unit of dollar exposure. KNOP pays a dividend, which adjusts put-call parity and shifts the ex-dividend pricing across the listed chain.
What is a covered call on KNOP?
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 KNOP snapshot
As of May 15, 2026, spot at $10.74, ATM IV 55.60%, IV rank 11.22%, expected move 15.94%. The covered call on KNOP 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 34-day expiry.
Why this covered call structure on KNOP specifically: KNOP IV at 55.60% is on the cheap side of its 1-year range, which means a premium-selling KNOP covered call collects less credit per unit of strike-width risk, with a market-implied 1-standard-deviation move of approximately 15.94% (roughly $1.71 on the underlying). The 34-day window matched to the front-month expiry keeps theta exposure bounded while still capturing the post-snapshot move; longer-dated KNOP expiries trade a higher absolute premium for lower per-day decay. Position sizing on KNOP should anchor to the underlying notional of $10.74 per share and to the trader's directional view on KNOP stock.
KNOP covered call setup
The KNOP 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 KNOP near $10.74, the first option leg uses a $11.28 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed KNOP chain at a 34-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 KNOP shares for the stock leg in covered calls and collars).
| Action | Type | Strike / Basis | Premium (est) |
|---|---|---|---|
| Buy 100 shares | Stock | $10.74 | long |
| Sell 1 | Call | $11.28 | N/A |
KNOP covered call risk and reward
- Net Premium / Debit
- N/A
- Max Profit (per contract)
- Unbounded
- Max Loss (per contract)
- Unbounded
- Breakeven(s)
- None on modeled curve
- Risk / Reward Ratio
- N/A
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.
KNOP covered call payoff curve
Modeled P&L at expiration across a range of underlying prices for the covered call on KNOP. 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.
When traders use covered call on KNOP
Covered calls on KNOP are an income strategy run on existing KNOP stock positions; traders typically sell calls at 25-35 delta with 30-45 days to expiration to balance premium against upside cap.
KNOP thesis for this covered call
The market-implied 1-standard-deviation range for KNOP extends from approximately $9.03 on the downside to $12.45 on the upside. A KNOP covered call collects premium on an existing long KNOP position, trading off upside above the short call strike for immediate income; the short strike selection should reflect the trader's view on whether KNOP will breach that level within the expiration window. Current KNOP IV rank near 11.22% 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 KNOP at 55.60%. As a Industrials name, KNOP options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to KNOP-specific events.
KNOP 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. KNOP positions also carry Industrials sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move KNOP alongside the broader basket even when KNOP-specific fundamentals are unchanged. Short-premium structures like a covered call on KNOP carry tail risk when realized volatility exceeds the implied move; review historical KNOP earnings reactions and macro stress periods before sizing. Always rebuild the position from current KNOP chain quotes before placing a trade.
Frequently asked questions
- What is a covered call on KNOP?
- A covered call on KNOP is the covered call strategy applied to KNOP (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 KNOP stock trading near $10.74, the strikes shown on this page are snapped to the nearest listed KNOP chain strike and the premiums come straight from the end-of-day bid/ask midpoint.
- How are KNOP 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 KNOP covered call priced from the end-of-day chain at a 30-day expiry (ATM IV 55.60%), the computed maximum profit is unbounded per contract and the computed maximum loss is unbounded per contract. Live intraday quotes will differ as the chain moves through the trading session.
- What is the breakeven for a KNOP covered call?
- The breakeven for the KNOP covered call priced on this page is no defined breakeven on the modeled curve 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 KNOP market-implied 1-standard-deviation expected move is approximately 15.94%; 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 KNOP?
- Covered calls on KNOP are an income strategy run on existing KNOP 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 KNOP implied volatility affect this covered call?
- KNOP ATM IV is at 55.60% with IV rank near 11.22%, 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.