You own 100 shares of TSLA. Sell one call against them and you get paid today, the trade-off is you cap your upside at the strike. The scale never moves, so you can watch the shape. Grab the blue dot: left and right changes the stock price, up and down changes implied volatility. Drag the strike line too. Lock any variable to hold it still.
Your outcome at expiration vs. just holding the shares
Covered call (drag the dot) Just holding shares Strike (your cap)
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Annualized assumes you repeat the same trade every period with no assignment. Real results vary.
Breakeven
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premium cushions your downside
If called away
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total profit if assigned
Upside you cap
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gains above strike you give up
Return if called
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over the holding period
Plain English
Three things to know about covered call income:
You get paid to hold shares you own. In practice the premium is cash you collect today on a position you already have.
The cap is the trade-off. Above the strike the shares get called away, so you give up the gains past it in exchange for the premium.
It is not risk free. You still carry the stock's full downside, cushioned only by the premium, so only write calls on shares you are fine holding.
Taxes are not shown here. Options and the underlying stock are taxed differently, and it depends on your holding period and account type. None of this is tax advice.
Where should I send it?
The Covered Call Income Tracker, a simple template to log every call you sell and the income it brings in.