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Covered call

Own 100 shares, STO (sell to open) a call, keep the premium, cap the upside. Close the call with BTC (buy to close).

You already own 100 shares. You STO (sell to open) a call and get paid. Below the strike you keep the shares and the cash. Through the strike the shares can leave at K — you still keep the premium.

Own 100 at $100. Sell a $110 call for $3. Called away: stock to $110 plus $300 = $1,300 above your $100. A drop in the stock is still yours. Teaching numbers only.

The lab includes the 100 shares. Delta starts near 1.00 and the short call trims it. A drop in the stock still shows in P/L (profit and loss).

covered-callOwn 100 shares, sell a call, keep the premium or get called away. Upside is capped. The stock can still fall.Covered call — three stepsTeaching sketch1Own 100Stock ticket. Not BTO.2STO a callCollect premium. Cap at K.3Expire or assignKeep shares, or sell at K.Expiration P/L vs long stockOwn 100 at $100 · sell $110 call for $3K $110cappedstock can still falldashed = stock alone
You already own the shares. STO the call. Below K: keep shares and cash. Through K: shares may leave at the strike. The drop is still yours.

Teaching lab

100 shares plus a short call

Own 100 at $100. STO a $110 call for $3. Stock delta stays; the call cuts it and collects theta.

P/L / share
+2.64
×100
+264
Delta
+0.893
Gamma
-0.0257
Theta / day
+0.0233
Vega / vol pt
-0.0529

P/L / share

vs the lesson entry

12.590.00-37.00$60$80$100$120$140

Delta

share-equivalent

1.000.00$60$80$100$120$140

Gamma

peaks near the strikes

0.000-0.051$60$80$100$120$140

Theta / day

clock

0.0590.000$60$80$100$120$140

Vega / vol pt

fear priced in

0.000-0.125$60$80$100$120$140

Rho / rate pt

small at 30 days

0.000-0.090$60$80$100$120$140

Package includes the shares. A drop in the stock is still yours. Teaching numbers only.

Try it: Practice train (paper shares, then the call)

Tickets for this structure

BTO (buy to open) · STO (sell to open) · BTC (buy to close) · STC (sell to close). Illustrative fills only. We never send these orders.

STO (sell to open)

Open a short

Sell to open (the call)

Own 100 AAPL at $190. STO (sell to open) 1× 30-DTE (days to expiration) $200 call at $3.00 ($300). Upside above $200 is capped.

BTC (buy to close)

Close a short

Buy to close (the call)

Call later $1.10. BTC (buy to close) at $1.10. Options P/L (profit and loss) = +$190. You still own the shares.

BTO (buy to open)

Open a long

Buy to open (not this open)

BTO (buy to open) a $200 call is a long call. A covered call opens with STO (sell to open), not BTO (buy to open).

STC (sell to close)

Close a long

Sell to close (only if you were long)

You are short, so the exit is BTC (buy to close). Assigned at $210: shares sold at $200; keep the $3.00.

Worked expiration paths

AAPL finishes $198: call expires. You keep the shares and the $300. You never BTC (buy to close) or STC (sell to close).

AAPL finishes $210: expected assignment. Shares leave at $200. The STO (sell to open) premium stays yours. This is not a substitute for a naked short call — without the 100 shares the STO (sell to open) is uncovered.

If those shares arrived from a cash-secured put, selling this call is lap 2 of the wheel. See the Wheel lesson.

How the Greeks move

Shares give you +1.00 delta. The short call is negative delta, negative vega, and you collect theta. Slide the stock through $110: the call’s delta grows and the cap appears in P/L (profit and loss). Rho is small at 30 days.

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Teaching numbers only — not a live quote, not a fill, not financial advice. All lessons · Back to Practice · Replay · Journal.