Covered Call

Generate income on existing long stock. Outlook: neutral. Direction: credit. Risk: limited.

A covered call pairs 100 long shares with a short call. The premium collected from the short call provides income; the short call caps upside above the strike. Downside is the same as holding the shares outright, offset only by the premium received.

This is one of the most common retail income strategies. The trade is often rolled weekly or monthly against a long-term core equity position — investors cap each period's upside in exchange for reliable premium collection.

Break-Even

Break-even = share cost basis − premium received. The short-call premium reduces your effective cost basis.

Max Profit

(Strike − share cost basis + premium) × 100 × contracts, achieved when spot is at or above the strike at expiration.

Max Loss

(Share cost basis − premium) × 100 × contracts, if the underlying goes to zero. Same as owning shares, reduced by the premium collected.

When to Use

• You already own the shares and expect sideways-to-modestly-bullish price action.
• IV rank is elevated — the short call captures rich premium.
• You are willing to part with shares at the strike if assigned.
• You want to generate income while holding a core position.

Common Pitfalls

• Capped upside — if the stock rallies hard, you miss everything above strike + premium.
• Early assignment on ITM calls around ex-dividend dates can cut off dividend capture.
• Downside protection is minimal — premium rarely exceeds 2–5% of share value.
• Tax consequences: assignment triggers a share sale at the strike, potentially generating short-term gains.

Try This on a Live Ticker

The strategy builder applies any structure to a live ticker with real Greeks and expiration P/L: SPY · QQQ · AAPL · NVDA · TSLA.