Covered return may be calculated on options trades where the premium is collected from selling options rather than from the purchase of contracts. These positions have a maximum return equal to the premium collected at trade entry. The covered return is an indication of the percent potential return against the notional risk or the amount of money that may be required if all short contracts were exercised.
Note: Covered return differs from Exercised Return. Exercised Return is specific to covered call setups and takes into account both the received premium and any potential appreciation in the underlying's (stock's) value at the short strike price.
