Formula

Covered call breakeven formula

The simplified covered-call breakeven is share basis minus premium received.

Hypothetical example

If shares were bought at $100 and a call was sold for $3.25, the simplified breakeven is $96.75 before commissions, taxes, dividends, and financing costs.

Important: breakeven is not a safety line. If the stock drops far below breakeven, the premium only offsets part of the loss.
BreakevenShare basis - premium received
Maximum simplified profitStrike - share basis + premium
Upside capShares may be called away above the strike
Downside exposureStock-like downside, reduced only by premium

Primary reading: OIC covered call strategy overview · OIC options pricing overview · FINRA options overview · Investor.gov options overview · OCC options disclosure document

Explore this topic cluster

Related lessons and tools on this site

Start with the main guideCovered Call Calculator and Return EstimatorHow a Covered Call Calculator WorksCovered Call Maximum Profit FormulaCovered Call Downside RiskCovered Call Assignment RiskCovered Call vs Cash-Secured PutCovered Call Calculator ExamplesCovered Call Trade ChecklistCovered Call Calculator FAQSources and Methodology for Covered Call Calculator

Optional related resources

More Calculators and Tools

Options problem-solving resourceReview assignment risk with Options Assignment HelpOptions profit calculatorModel payoff scenarios with Options Profit CalculatorEarnings calculatorCheck event risk with Earnings Options Calculator
Reviewed/updated 2026-07-30 · SourcesMethodologyRisk disclosureCorrections

Optional bonus

Join the Free Options Formula Trading Lab

Get the options process in one place: structured trade ideas, research tools, calculators, education, market context, and support from traders focused on defined-risk setups.

Join the Free Trading Lab

No hype, no promises of wins, and no pretending every setup works. The free group is built to help you make every trade a clear decision instead of a reaction.