A covered call rents out shares you already own: sell someone the right to buy your 100 shares at the strike and pocket the premium today. Three endings — called away at the strike (max profit, banked), the stock stalls (keep shares and rent, sell another), or the stock falls (the premium cushions the drop by exactly its own size and no more).
The strike is chosen against your cost basis, not the stock price. If assigned you realize strike − basis + premium: at a $100 basis, a $105 call sold for ~$1.66 caps you at about $666 per contract, roughly 80% annualized if called and ~20% annualized rent if the stock just sits. But sell a $100 call against a $105 basis and assignment realizes about −$141 per contract — a covered call below your basis quietly converts a paper loss into a guaranteed one.
The real cost never shows up as a debit: it's upside forgone above the strike. A covered call is short volatility with negative skew — most months the cap costs nothing, then one melt-up hands back years of rent. Income framing counts the premium; total-return truth counts share return capped at the strike plus premium, which lags buy-and-hold in strong bull markets by design.
The interactive builder prices the call live from your basis, strike, days-to-expiry, and implied volatility, flipping its readout red the moment a strike would lock in a loss — the wheel's most common self-inflicted wound, caught before you sell it.
Educational, not investment advice.