Model and input conventions
Per-unit expiry P&L equals terminal price minus acquisition price, minus max(terminal price − call strike, 0), plus the received call premium. Multiply by the underlying quantity and deduct fixed total costs. The option quantity is exactly matched to the held asset; an uncovered portion requires a different model. Once terminal price exceeds the strike, further gains in the asset are offset by the short call.
Worked numerical example
An asset acquired at 100 is paired with a short 110 call that receives 4. With one unit and no costs, break-even is 96. An expiry at 110 or 200 gives the same maximum P&L of 14. If the underlying falls to zero, the combined loss is 96 despite having collected the premium. At a final price of 100, the position earns only the 4 premium.
Read the scenario table
Review rows on both sides of the call strike to see where total P&L stops increasing. The short option’s intrinsic payoff is negative when the call is in the money, while its premium enters as a negative net payment, representing cash received. Compare the stock column with total P&L to quantify the upside surrendered in any selected strong-rally scenario.
Where the model stops
This is an expiry cash-payoff model, not a dividend-income forecast or a rolling-call strategy. Early assignment, corporate or token-specific adjustments, financing and the sale of the actual asset are outside its scope. Premium income does not insure the holding against a severe decline. A displayed maximum gain assumes the acquisition price and all represented quantities are correct and remain unchanged.