Covered Call & Cash-Secured Put Calculator

About the Covered Call & Cash-Secured Put Calculator

Selling a covered call on shares you hold, or a cash-secured put with the cash set aside to buy them, brings in a premium now and fixes what happens at the strike. This calculator works out what each one returns if the option is assigned and if it is not, the downside break-even, the maximum profit, the profit or loss at every price at expiry, and the annualised return, simple and compounded — after your commission per contract and per share, an assignment fee and, for a put, the interest the cash earns.

It counts dividends you expect before expiry (kept only if you still hold the shares on the ex-dividend date), works with any contract size — 100 shares for a standard US, Canadian or Australian equity option, or your exchange’s lot size — and with any currency. It uses no market data: every price and premium is one you enter.

Common uses

• See what selling a call against 100 shares you hold returns if they are called away, and if they are not.
• Find the effective price you would pay for shares by selling a put instead of buying them now.
• Compare the annualised return of strikes and expiries with your own costs included.
• Check how much a fall the premium covers before a covered call loses money.

The formulas

• Covered call, assigned: (K − S₀ + c + D) × q − costs, on a net cost of (S₀ − c) × q, where K is the strike, S₀ the share price, c the premium, D the dividends a share before expiry and q the shares.
• Covered call, unchanged: (c + D) × q − costs. Break-even: S₀ − c − D + costs ÷ q. These follow the Options Industry Council’s covered call page: the most it can make is the strike less the purchase price plus the premium, and the break-even is the purchase price less the premium.
• Cash-secured put: the cash set aside is K × q; if it expires, the return is (p × q + interest − costs) ÷ (K × q), the most it can make; if assigned, the effective purchase price is K − p + costs ÷ q, as on the Options Industry Council’s cash-secured put page.
• If the share fell to 0: the most either can lose — what the shares cost less the premium for a covered call, the strike less the premium for a put (the council’s maximum loss), after your costs.
• Annualised: simple = return × 365 ÷ days; compound = (1 + return)^(365 ÷ days) − 1. Not shown under 7 days or above 1,000,000% a year, where a yearly figure says nothing useful.

Reading the results

• If assigned: the call is exercised and your shares are sold at the strike, or the put is exercised and you buy the shares at the strike.
• If it expires: the option expires worthless and you keep the premium (and, for a call, the shares). For a put this is the headline figure, its best case.
• If the price is unchanged: the price at expiry is the price now, so a call is assigned if its strike is below that price and a put if its strike is above it; otherwise the option expires (an option exactly at the money is not exercised by itself).
• Annualised figures from a few weeks can look large: a short period’s return compounded over a year can look much larger than it was, and the same trade may not be available again on the same terms.

What it leaves out

Taxes; what the shares could have made above the strike (a covered call gives that up); the risk of the share falling (a covered call keeps almost all of it, less the premium); early assignment of American options, which is possible at any time and most likely just before an ex-dividend date; and interest on the money in the shares. Each can change the real outcome.

Limitations

• European-style outcomes at expiry: early assignment is described, not modelled.
• One expiry and one strike at a time.
• Taxes are left out.
• It calculates from your numbers and uses no market data: it says nothing about where any price is going.

Privacy

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