Covered calls, risk first: breakeven, max loss, assignment and the capped upside
A covered call keeps nearly all of the stock's downside while capping the upside. An illustrative payoff at expiration, the three numbers to write down, early assignment around ex-dividend dates, what costs do to the cushion, and a checklist before you sell one.
Plays from YouTube once you press play (nothing loads before that). Captions included · watch on YouTube
In this video
- 0:00 Intro
- 0:29 Two legs
- 0:49 The payoff
- 1:11 Three numbers
- 1:32 The real downside
- 1:52 Assignment
- 2:22 Rolls and costs
- 2:43 Checklist
- 3:04 Free calculator
Key points
- You still own the stock, so you keep almost all of its downside; the premium is only a small cushion.
- Illustrative: buy at $50, sell the $55 call for $1.20. Breakeven $48.80, maximum gain $620, maximum loss $4,880.
- US equity options are generally American-style, so a short call can be assigned on any business day, most often around ex-dividend dates or expiration.
- Only sell a strike you are genuinely willing to sell the shares at, and count commissions, spreads and roll costs.
- Run the checklist before every sale: would you hold this stock at this size with no option attached?
Examples use round, illustrative numbers and are not actual trades or results. Education only — not investment, tax or legal advice. Narration uses two AI-generated voices.
Get the free position-size calculator
Turn any stop into a contract count, rounded down and costs included, plus an email when new guides and the playbook are published.