STEM Covered Call Strategy
STEM (Stem, Inc.), in the Technology sector, (Software - Infrastructure industry), listed on NYSE.
Stem, Inc. operates internationally as a prominent provider of intelligent, digitally interconnected energy storage networks. The company delivers energy storage systems, which it sources from original equipment manufacturers (OEMs). Central to its offering is Athena, a proprietary artificial intelligence platform designed to integrate battery hardware with advanced software-enabled services, thereby optimizing the operation of these energy storage systems. Stem also extends its expertise through a wide array of support services, including system design and engineering, supply chain management, maximization of energy storage value streams, administration of warranties and preventive maintenance programs, operational reporting, and assistance with program enrollment and incentive management. Its diverse clientele encompasses commercial and industrial businesses, independent power producers, developers of renewable energy projects, and utility companies alongside grid operators. Stem, Inc. was founded in 2009 and maintains its corporate headquarters in San Francisco, California.
STEM (Stem, Inc.) trades in the Technology sector, specifically Software - Infrastructure, with a market capitalization of approximately $56.8M, a beta of 1.52 versus the broader market, a 52-week range of 4.92-32.23, average daily share volume of 143K, a public-listing history dating back to 2020, approximately 423 full-time employees. These structural characteristics shape how STEM stock options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of 1.52 indicates STEM has historically moved more than the broader market, amplifying both the directional payoff and the realized volatility relative to an index-equivalent position.
What is a covered call on STEM?
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.
STEM snapshot
As of August 14, 2026, spot at $6.21, ATM IV 113.50%, IV rank 40.76%, expected move 32.54%. The covered call on STEM below is built from the 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 STEM specifically: STEM IV at 113.50% is mid-range versus its 1-year history, so the credit collected on a STEM covered call sits in line with its long-run distribution, with a market-implied 1-standard-deviation move of approximately 32.54% (roughly $2.02 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 STEM expiries trade a higher absolute premium for lower per-day decay. Position sizing on STEM should anchor to the underlying notional of $6.21 per share and to the trader's directional view on STEM stock.
STEM covered call setup
The STEM 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 STEM at $6.21 on that close, the first option leg uses a $6.52 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed STEM 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 STEM shares for the stock leg in covered calls and collars).
| Action | Type | Strike / Basis | Premium (est) |
|---|---|---|---|
| Buy 100 shares | Stock | $6.21 | long |
| Sell 1 | Call | $6.52 | N/A |
STEM 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.
STEM covered call payoff curve
Modeled P&L at expiration across a range of underlying prices for the covered call on STEM. 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 STEM
Covered calls on STEM are an income strategy run on existing STEM stock positions; traders typically sell calls at 25-35 delta with 30-45 days to expiration to balance premium against upside cap.
STEM thesis for this covered call
The market-implied 1-standard-deviation range for STEM extends from approximately $4.19 on the downside to $8.23 on the upside. A STEM covered call collects premium on an existing long STEM position, trading off upside above the short call strike for immediate income; the short strike selection should reflect the trader's view on whether STEM will breach that level within the expiration window. Current STEM IV rank near 40.76% is mid-range against its 1-year distribution, so the IV signal is neutral; the covered call thesis on STEM should anchor more to the directional view and the expected-move geometry. As a Technology name, STEM options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to STEM-specific events.
STEM 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. STEM positions also carry Technology sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move STEM alongside the broader basket even when STEM-specific fundamentals are unchanged. Short-premium structures like a covered call on STEM carry tail risk when realized volatility exceeds the implied move; review historical STEM earnings reactions and macro stress periods before sizing. Always rebuild the position from current STEM chain quotes before placing a trade.
Frequently asked questions
- What is a covered call on STEM?
- A covered call on STEM is the covered call strategy applied to STEM (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 STEM stock at $6.21 on the most recent close, the strikes shown on this page are snapped to the nearest listed STEM chain strike and the premiums come straight from that session's bid/ask midpoint.
- How are STEM 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 STEM covered call priced from the end-of-day chain at a 30-day expiry (ATM IV 113.50%), 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 STEM covered call?
- The breakeven for the STEM covered call priced on this page is no defined breakeven on the modeled curve at expiration, derived from the 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 STEM market-implied 1-standard-deviation expected move in the same options snapshot is approximately 32.54%; 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 STEM?
- Covered calls on STEM are an income strategy run on existing STEM 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 STEM implied volatility affect this covered call?
- STEM ATM IV is at 113.50% with IV rank near 40.76%, 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.