Covered Call Trade Management Calculator™
On this page: • Overview • Trade Entry • Trade Closing • Rollover 1 • Rollover 2    • More!	Manage open covered call trades for the maximum profit!

Our Trade Management Calculator™ lets you actually manage live covered call trades. Should you close the trade, or roll up, or roll down, or roll out? Or should you stand pat? Our TM Calculator won't make trading decisions for you, but it will show you where the money is in covered calls. Our calculator takes you all the way through the trade. And it gives you price updates in an instant, with just a mouse click.

The calculator's First Row shows your potential return from buying shares of stock and writing the covered call, both if the call is not exercised and if it is exercised. The Second Row shows the result if you buy back the call and just sell the shares of stock. The Third and Fourth Rows show the potential results if you were to buy back the original call, but keep the stock and sell a call with a different striked price and/or expiration month (known as "rollovers" or "rolls"). Our web-based (no software to download) TM Calculator pops up conveniently in its own window and stores up to 24 different covered call positions.

Here is a covered call example using U.S. Steel (X), showing the effect of closing the trade and the potential results of a couple of different rolls:

NOTE: All returns are WITHOUT margin and before brokerage commissions and costs.

First Row: the Covered Call Buy-Write

Assume that with 30 days remaining before option expiration, you buy X stock at $25/share and sell the current-month $30 call for a premium of $2, which effectively reduces your cost basis in the stock to $23. On the left side of the calculator, we enter the stock and call symbol, the $25 stock purchase price and the premium received for selling the call. To get calculations, hit the TAB button or just click anywhere on the right side of the calculator.

This buy-write covered call trade sets up an 8.7% flat return (the return if the call is not exercised and the stock price remains the same) of $2.00 on your $25 stock buy, but your return will be $7.00/share if the call is exercised, a 30.4% return. Why is the if-called return so high? Because you received $2.00 for selling the call, plus you would make a profit of $5/share if the stock is called away (sold) at the call's $30 strike price.

Second Row: the Close

Four days after entering the trade, the stock has risen to $32, and you are likely to make the maximum (if-called) possible profit in the position. Could you close the position at an acceptable profit now? The TM calculator will tell you immediately. Just click the update [U] button, and the calculator shows you the result of closing the position. Or you can enter the prices manually, if you prefer.

The calculator shows that if you buy back the $30 call, which will cost $3.20, and sell the stock for its current $32 price, your immediate profit on closing the trade would be a respectable $5.80 per share, a blazing return of 25.2% for four days! This is a lower profit, perhaps, than could be gotten by waiting for expiration and letting the stock be called away at $7.00. However, you would get the $5.80 return immediately instead of waiting for the stock to be called away, which might not occur until expiration and which is weeks away.

And - there is never any guarantee the stock will be called away; the stock could pull back under $30 by expiration, meaning the $30 calls would not be exercised. Only you can decide which course is right for you: close for the sure profit (and write another covered call) or hang in for the potentially bigger profit.

Analysis: You received $2.00 for selling the call, bought the call back for $3.20, and made a profit of $7 per share when you sold the stock at $32. ($2.00 - $3.20 + $7 = $5.80).

The Second Row shows that you can close the position for a substantial, immediate profit. But - could you improve your position to extract even more profit, or perhaps more security? It is possible to roll the calls, which means to buy back the calls you sold and sell calls with a different exercise price, or different expiration month, or both.

Third Row: the First Roll

Suppose you are a bit bearish on the stock short term; you are concerned that the stock has spiked up and will pull back. Let's look at the possibility of rolling down to the $25 calls. You can buy back the original $30 call at a cost of $3.20 and sell the lower-strike $25 call in the same expiration month for an $8.75 premium.

Just click the update [U] button, and the calculator shows you the potential result of the roll. Or you can enter the prices manually, if you prefer.

Your cumulative return on the transaction if called out at $25 would be $7.55 per share, for a 32.8% return, even though if called out you will sell the stock at the lower price of $25.

Analysis: This shows the power of covered calls! You received $2.00 for selling the call, bought the call back for $3.20, then sold the $25 call for $8.75 ($2.00 - $3.20 + $8.75 = $7.55).This roll down lowered cost basis $5.55, from $23 to $17.45, which gives much more downside protection than in the unadjusted position.

Fourth Row: the Second Roll

On the other hand, if you were short-term bullish, you might prefer to roll up instead of rolling down. Suppose you buy back the original $30 call and sell the $35 call in the same expiration month for a $3.00 premium (that is, roll up to the $35 call). Just click the update [U] button, and the calculator shows you the potential result of the roll. Or you can enter the prices manually, if you prefer.

If the stock price does not change (remains at $32) by expiration, you would have a potential profit to date of $8.80 or 38.2%.

Analysis: You received $2.00 for selling the call, bought the call back for $3.20, then sold the $35 call for $3.00 ($2.00 - $3.20 + $3.00 = $1.80). Although your actual profit from selling and buying back calls to date is $1.80, the calculator shows you a profit of $8.80, because it includes the $7.00 of potential profit contained in the position due to the stock's rise from $25 to $32. Should the stock pull back before expiration, that $7.00 in potential profit will shrink.Indeed, if the stock pulls back to $25, it will all evaporate, though you will still have the $1.80 in net call premium realized to date.

This roll up positioned you to make a killing on a hot stock, but did not lower your breakeven point (cost basis).Note that you had $2.00 in net premium on the trade open, but now are ahead only $1.80 in net call premium. But because we have only modestly increased your cost basis, this roll is quite sensible. But suppose this roll up had added $2.00 to your cost basis ($25, instead of $23.20)? These are the kinds of decisions that are presented to covered call writers. Our calculator simply enables you to make lightning-fast decisions.

If the stock is above $35 at expiration and is sold at $35, you would realize an additional $5.00 in profit ($35 strike - $30 strike, for a total return of $11.80, or a staggering 51.3%). Of course, there is no guarantee the stock will be above the $35 strike at expiration and that you will be called out at $35 - nor even that the stock will hold its current $32 price. Notice that rolling up increased cost basis slightly, from $23 to $23.20. The stock could pull back before expiration, leaving you high and dry in the $35 call with an increased cost in the trade. Rolling the call up therefore is a very bullish move.

Note: You could also have rolled out to the next-month $25, $30 or $35-strike calls, in each case bringing in more premium than rolling to a different call in the current month. Our calculator shows you the result of every roll you enter.

So which is the best strategy above? There is no way to know for sure until trade conclusion. But the TM Calculator shows you that you can immediately close your position with a 25% profit and terminate all trade risk, freeing your funds for the next trade. If you are convinced the stock will continue to rise, the roll up shown in the 4th Row offers even higher potential returns, but those returns are in no way assured - the stock could stall out or even pull back. And, you have to stay in the trade much longer to get the higher returns.

As always, the choice of action belongs to the trader. The TM Calculator simply gives you an instant profit readout on trade closes and the potential results of rolls. This is its power. And no one else on earth offers such a calculator.

Auto-Update: Automatically Update Prices with a Mouse Click
Each row of the TM Calculator can be updated with a click of the [U] update button, which instantly refreshes your calculations based on 20-minute delayed prices. In order for the update to occur, the stock symbol and option symbol must be entered on the 1st Row. For the automatic update to work on the 3rd and 4th Rows, you must enter the symbol of the calls to which you are considering a roll.

Position Storage Fields: Holds 24 Trade Positions
The stock fields on the bottom of the TM Calculator automatically keep track of up to 24 different covered call positions. All the data you enter for each stock is stored for you to update and watch to determine if it's time for you to change your position.

Calculator Data: Import and Export Data
The calculator data can be stored as a text file on your computer's desktop (default location). You can import or export this text file, allowing you to synchronize calculator data on different computers. Be sure to export data after making a change in order to update the text file on your desktop.