Examples

Covered Call Yield Example — COIN

Illustrative, educational yield and payoff math for a Coinbase Global Inc. (COIN) covered call; this example is not a recommendation to trade COIN or to use any specific strike or expiration.

View the demo Get advisor overview Get advisor FAQ

Important: hypothetical illustrations intended primarily for financial professionals. Retail viewers should treat as educational only. See Performance Disclosures.

Hypothetical/Illustrative: Figures and examples on this page are theoretical and for illustration only; they do not represent actual results. Assumptions, inputs, and model limitations materially affect outcomes. Options involve risk; losses can exceed premiums received. This content is not investment, tax, or legal advice. See Performance Disclosures and Legal.

Performance presentation: Any returns or figures referenced are theoretical or illustrative unless expressly labeled otherwise. Where performance is shown, figures should be understood net of platform/service fees when stated and otherwise may exclude trading costs, taxes, and slippage. Time periods, data sources, and key assumptions materially affect outcomes. See Performance Disclosures.

Mechanics of the Covered Call (COIN example)

Figures are hypothetical and rounded for clarity. This is for illustration only and not investment advice.

Example setup

COIN trades at $220. You buy 100 shares (≈ $22,000) and sell a 6‑month covered call with a $280 strike for ≈ $25.00.

Option premium received ≈ $2,500 per 100‑share contract.
Net cash outlay ≈ $22,000 − $2,500 = $19,500.
Hypothetical extrapolated gross premium yield over ~180 days ≈ $2,500 ÷ $19,500 ≈ 12.8% (annualized ≈ 26.0%).
Maximum loss occurs if COIN falls to zero; you could lose almost the entire ≈ $22,000 stock cost, partially offset only by the ≈ $2,500 premium (net ≈ $19,500 still at risk).
These percentages are simple mathematical projections for this single 6‑month contract and do not represent actual or guaranteed performance.

These hypothetical gross yield figures exclude brokerage commissions, regulatory fees, bid‑ask spreads/slippage, and taxes; including such costs would reduce any realized results.

If COIN closes above $280 at expiration

Shares are called away at $280. Stock gain ≈ ($280 − $220) × 100 = $6,000. Add the $2,500 premium ⇒ ≈ $8,500 total on the $22,000 equity cost.

Hypothetical extrapolated gross payoff yield over ~180 days ≈ $8,500 ÷ $22,000 ≈ 38.6%.
Annualized (compound approximation) ≈ 92% — hypothetical illustration only based on repeating similar contracts.
Maximum loss still occurs if COIN falls to zero; you could lose almost the entire ≈ $22,000 stock cost, partially offset only by the ≈ $2,500 premium, and the illustrated ≈ $8,500 outcome assumes assignment at $280 instead of a decline.
These figures are mathematical what‑if projections for this single contract and time frame; actual opportunities, prices, and assignment outcomes can differ, and similar yields may not be available or repeatable.

If COIN is at or below $280 at expiration

The option expires worthless; you keep the shares and the ≈ $2,500 premium (a hypothetical extrapolated gross premium yield of ≈ 12.8% over the net ≈ $19,500 basis). You may choose independently whether to sell a new covered call; this example simply illustrates how repeating contracts could affect income.

Maximum loss still occurs if COIN falls to zero; you could lose almost the entire ≈ $22,000 stock cost, partially offset only by the ≈ $2,500 premium. The yield percentages are mathematical what‑if projections for this single contract and are not predictions or guarantees of future performance.

Weigh pros and cons

Toll Booth Trading is a software-only order routing and automation tool; it is not a broker-dealer and does not provide personalized investment advice. Covered calls trade upside beyond the strike for upfront premium and potential downside cushion.

When evaluating covered calls, investors independently choose strikes and durations aligned with their own risk and income goals. This page is illustrative educational content and not a recommendation to trade COIN or to use any particular strike or expiration.

Summary

Buy 100 shares of COIN and sell one call at a higher strike for income.
Premium reduces net basis (≈ $19,500) and provides cushion.
If assigned at $280: hypothetical ≈ $8,500 gross gain on $22,000 over ~180 days (~38.6% hypothetical extrapolated gross payoff yield).
Maximum loss in all scenarios occurs if COIN falls to zero; you could lose almost the entire ≈ $22,000 stock cost, partially offset only by the ≈ $2,500 premium (net ≈ $19,500 at risk).
If not assigned: keep shares and premium; consider selling another call.
Risks include price declines, assignment, and opportunity cost above the strike, among others; the hypothetical yields above do not reflect fees, taxes, or slippage and do not guarantee future results.