What Happens If Stock Goes Up After Selling Covered Call?

When stock rises after selling a covered call, here's what happens:

Scenario 1: Stock Rises But Stays Below Strike

Stock goes from $100 to $105, your strike is $110

  • Option expires worthless ✅
  • You keep shares ✅
  • You keep premium ✅
  • Best case scenario!

    • Scenario 2: Stock Rises Above Strike

    Stock goes from $100 to $120, your strike is $110

    What happens:

  • You're assigned (or will be at expiration)
  • You sell shares at $110
  • You keep the premium
  • You miss gains above $110

    • Example:

  • Sold $110 call for $3
  • Stock at $120 at expiration
  • You sell at $110 + $3 premium = $113 effective
  • You missed: $120 - $113 = $7 per share

    • Your Options When Stock Rallies

    1. Let It Get Assigned

  • Take your profit
  • Move on to next trade
  • Not a loss—you made money!

    • 2. Roll Up and Out

  • Buy back current call
  • Sell new call at higher strike, farther out
  • Try to do for a credit

    • 3. Buy to Close

  • Close the call
  • Keep your shares
  • Accept the loss on the option

    • Is This a "Loss"?

    No! You still made money:

  • Capital gains to strike price
  • Plus premium collected

    • You just made less than you could have. That's the trade-off with covered calls.