Covered Calculator View

Choose to base the calculations using a stock price from the market: Ask for Covered call calculations and Bid for Covered Put calculations, or input a cost you want to use as the stock price.

• The input cost is loaded with an average cost from your account when that is available.
• If the Bid/Ask Prices are chosen, the calculations will stay updated based on changes in the stock price.
• Calculations will stay updated with quote changes in the option prices.

Shows in Dollars the maximum amount you could make from that trade. This would assume that the option expires with an assignment. If assigned on Calls, you would be selling the stock, and if assigned on puts you would be buying the stock back.

• Call Calculation: ((Call strike price) - (either Stock Ask or input stock price, depending on stock price chosen) + (call bid))* shares input * option multiplier, usually 100)
• Put Calculation: ((either Stock Bid or input stock price, depending on stock price chosen) + (put bid) - (Put strike price))* shares input * option multiplier, usually 100)

The % return if the max gain is reached, expressed as a % of the initial investment price, calculated as follows:

• Call Calculation: Max Gain / ((stock Ask or input cost – Call Bid)*share quantity)
• Put Calculation: Max Gain/ ((stock Bid or input cost + Put Bid)*share quantity)

Static Return on Investment shows in Dollars the return if the stock price did not move from the current price and the option was to expire.

Calculations:

• If stock would be assigned, uses the Max Gain calculations above
• If stock would not be assigned,
  • Call Calculation: Call Bid * share quantity
  • Put Calculation: Put Bid * share quantity

The Static ROI represented as a %.

• Call Calculation: Static ROI / ((stock Ask or input cost – Call Bid)*share quantity)
• Put Calculation: Static ROI/ ((Stock Bid or input cost + Put Bid)*share quantity)

Target Return on Investment shows in Dollars the return if the target price is reached at expiration. The Target price can be any price the stock could reach, and could be used to see what the profit or loss would be at that target price.

Calculations:

• If stock would be assigned, uses the Max Gain calculations above
• If stock is unchanged, uses the Static ROI calculation above
• If stock price changes,
  • Call Calculation: Call Bid +/– difference in stock Ask or input cost to target price
  • Put Calculation: Put Bid +/– difference in stock Bid or input cost to target price

The Target Return on Investment expressed as a %

• Call Calculation: Target ROI / ((stock Ask or input cost – Call Bid) * share quantity)
• Put Calculation: Target ROI/ ((Stock Bid or input cost + Put Bid) * share quantity)

The price the stock could reach at expiration where the profit or loss is 0 for the strategy based on the inputs.

Assumes a profitable transaction, so when a profit is not possible, shows “—“.

• Call Calculation: Ask price of stock or input cost – Call Bid Price
• Put Calculation: Bid price of stock or input cost + Put Bid Price

Implied Volatility based on the option midpoint price and underlying price as calculated with selected option pricing model.

IV is a theoretical value (in %) designed to represent the forecasted volatility of the security or index as determined by the prices of multiple call and put options using the Black-Scholes pricing model.

Other variables usually include security price, strike price, risk-free rate of return, and days to expiration. If all other variables are equal, the security with the highest volatility will generally have the highest option prices.