Covered Call & PMCC Estimator

Covered Call & PMCC Calculator

Profit, Net Debit & Annual Return

User Guide

This tool is designed to help you analyze two popular options strategies: **Covered Calls** and the **Poor Man's Covered Call (PMCC)**. Use the sections below to input your trade details and see key metrics like profit, return, and breakeven points.

Choose **Section 1** if you currently own 100 shares of a stock and are planning to sell covered calls against them.
Choose **Section 2** if you want to use the PMCC strategy, which provides a similar payoff to a covered call with less capital.
Adjust the **Holding Period** to compute real returns per trade duration, which will then be used to calculate the annualized return.
Use the interactive payoff charts to visualize your potential profit and loss scenarios.

Section 1 – Standard Covered Call

This calculator helps you analyze the potential returns of a standard covered call strategy.

Stock Price ($):

Call Strike Price ($):

Premium Received per Contract ($):

Number of Option Contracts (×100 shares):

Holding Period (days):

Section 2 – Poor Man’s Covered Call (PMCC)

This calculator helps you analyze this synthetic strategy. It computes the total trade cost, max profit, and annualized return.

Long ITM Call Cost ($ per contract):

Short Call Premium Received ($ per contract):

Strike Spread (Short Strike − Long Strike) ($):

Number of Contracts:

Holding Period (days):

How It Works – Core Formulas & Logic

This tool uses industry-standard financial formulas to provide accurate calculations. Here is a breakdown of the logic for each strategy.

Covered Call Formulas:

**Net Debit / Break-even:** This represents the price at which you break even on the trade.
```
Net Debit = Stock Price - Premium Received
```
**Return if Flat:** The profit percentage if the stock price remains unchanged.
```
Return if Flat = (Premium Received / Net Debit) * 100
```
**Return if Called:** The maximum profit percentage achieved if the stock price closes at or above the strike price.
```
Return if Called = ((Strike Price - Stock Price) + Premium Received) / (Stock Price - Premium Received) * 100
```

**Max Profit / Max Loss:**

Max Profit = (Strike Price - Stock Price) + Premium Received

Max Loss = Net Debit

**Annualized Return:** This calculation helps you understand your return over a year based on your holding period.
```
Annualized Return = Return × (365 / Holding Period)
```

Poor Man’s Covered Call (PMCC) Formulas:

**Total Trade Cost:** This is your maximum loss on the trade.

Total Cost = Long ITM Call Cost - Short Call Premium Received

**Max Profit:** The maximum potential gain from the strategy.
```
Max Profit = (Strike Spread) - Total Trade Cost
```
**Annualized PMCC Return:** The return on investment for the PMCC strategy, annualized for comparison.
```
Annualized Return = (Max Profit / Total Trade Cost) × (365 / Holding Period) * 100
```

Frequently Asked Questions

How to calculate covered call profit?

Our **covered calls calculator** helps you determine the maximum potential profit. This is achieved if the stock price closes at or above the strike price at expiration. The profit is calculated by adding the premium received to the difference between the strike price and your stock's purchase price. This is a key part of any **covered call profit calculation example**.

How is net debit calculated in covered calls?

The net debit is your effective breakeven price for the trade. It is calculated by taking the stock price at which you bought your shares and subtracting the premium you received from selling the call option. It represents your cost basis for the trade.

What is a poor man’s covered call calculator?

A **poor man's covered call calculator** is a tool that analyzes a PMCC strategy. The PMCC is a diagonal debit spread where you buy a deep in-the-money (ITM) long-dated call option instead of owning 100 shares of stock, and then sell a short-dated out-of-the-money (OTM) call option against it. Our tool helps you determine the total cost and potential profit of this strategy.

How to calculate annual return on weekly covered calls?

To calculate the **annual return on weekly covered calls**, you first need to determine the total return for a single trade. Then, you can use our calculator's annualized return formula: (Return / Holding Period in days) * 365. This allows you to compare returns from trades with different durations on a yearly basis.

Covered Call & Poor Man’s Covered Call Calculator