Calculate the income potential and risk-adjusted return of selling covered calls. The essential tool for dividend and income-focused stock investors.
Selling a call is "covered" because you already own the shares. If the stock price spikes, you aren't forced to buy shares at a high price to fulfill the contract—you just sell your own shares.
Stock can drop this much before net loss
Your new cost basis per share
Note: Annualized returns assume you can repeat this strategy every 30 days throughout the year. Markets are dynamic, and premiums fluctuate based on volatility and price moves.
A Covered Call is an options strategy where you own shares of a stock and "sell" the right for someone else to buy those shares from you at a specific price (the Strike Price). In exchange for giving up the potential "moonshot" gains, you get paid Premium cash immediately.
Traders use covered calls to generate Monthly Income from stocks they already plan to hold. It is particularly effective in flat or slightly bullish markets. It also lowers your "Cost Basis," giving you a buffer against small price drops.
Pro Tip:
Sell calls on stocks you are happy to own for the long term. Avoid selling calls on highly volatile "meme stocks" unless you are comfortable with being called away.
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