Calculate a covered call’s terminal value and simple profit

Keep the original purchase and premium

The position holds one stock unit bought at 100 and writes one call at strike 110, receiving premium 4 per unit. Both refer to the same underlying unit. No stock income, financing or transaction costs are included.

Subtract the written-call payout

Terminal stock value is S. Writer call amount is −max(S−110,0). Combined terminal value is min(S,110). Simple profit subtracts stock cost 100 and adds premium 4, giving min(S,110)−96.

Inspect the cap and remaining downside

Do not describe the receipt as risk-free income

Profit is capped at 14 when S≥110, but can fall to −96 at S=0. The stock leg covers the call’s matching-unit obligation in this payoff model; it does not remove stock-price downside or establish actual assignment mechanics.