You own 100 TSLA shares (cost $420) and sold one call against them for a credit. 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 and isolate one effect. Above the strike your shares get called away, so your gain is capped.
Profit / loss per share
Value today (drag the dot) At expiration Max profit (capped)
Position value now
$0
shares minus short call
Profit / loss
$0
per share
Max profit
$0
shares called away
Breakeven
$0
stock at expiration
Plain English
Three things to know about a covered call:
You get paid up front for a promise. In practice you collect cash today for agreeing to sell your 100 shares at the strike if the stock gets there.
The cap is the trade-off. Above the strike your shares get called away, so you give up the gains past it. You keep the premium either way, which is the whole point.
You still own the stock underneath. This is the one selling strategy I am comfortable with, because the shares back it. It is not risk free though: you carry the stock's full downside, cushioned only by the premium.
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.