Net Premium and Net Credit in a Covered Call Screener: What They Mean and How to Compare Trades

The Short Answer: What Net Premium and Net Credit Mean

Net premium — also called net credit — is the cash you actually collect in your brokerage account after all transaction costs when you sell a covered call. It is the option's bid price minus any commissions and exchange fees. That single number is the most honest starting point for comparing two covered call trades, because it shows exactly what you get paid to take on the obligation of potentially selling your shares.

Most covered call screeners display this figure in dollars per share. Because standard US equity options cover 100 shares per contract, a net credit of $1.45 per share means $145 lands in your account for every contract you sell. Some screeners also show it as a percentage of the stock's current price, which makes cross-stock comparisons easier.

Why 'Gross Premium' and 'Net Premium' Are Not the Same Thing

The gross premium is the midpoint or last-trade price you see on an options chain. The net premium is what you realistically pocket. The gap between them comes from two sources.

First, the bid-ask spread. Market makers buy options at the bid and sell at the ask. When you sell a call, you are the one hitting the bid. If the bid is $1.40 and the ask is $1.60, the midpoint looks like $1.50, but you will likely fill closer to $1.40 to $1.45 on a liquid name. On a thinly traded stock, that spread can eat $0.20 or more per share.

Second, commissions and exchange fees. Most US retail brokers now charge $0.50 to $0.65 per contract for options, plus a small exchange fee. On a $1.40 bid, a $0.65 commission reduces your net credit to roughly $1.33 per share. That is a 5% haircut before the trade even starts. FINRA requires brokers to disclose all fees in your trade confirmation, so check that document if you are unsure what you are paying.

A good screener does this math for you automatically. If yours does not, subtract your broker's per-contract fee from the bid price to get a realistic net credit estimate.

Worked Example: Comparing Two AAPL Covered Calls Side by Side

Suppose Apple (AAPL) is trading at $213.50 and you already own 100 shares. You are looking at two calls expiring in 30 days.

Option A — the $215 strike (just out of the money): - Bid: $3.20 | Ask: $3.40 - Realistic fill: $3.25 - Commission: $0.65 - Net credit per share: $3.18 - Net credit per contract: $318 - Net credit as % of stock price: 1.49% - Annualized static return: roughly 18.1%

Option B — the $220 strike (further out of the money): - Bid: $1.55 | Ask: $1.75 - Realistic fill: $1.60 - Commission: $0.65 - Net credit per share: $1.53 - Net credit per contract: $153 - Net credit as % of stock price: 0.72% - Annualized static return: roughly 8.7%

On raw dollars, Option A pays more than double. But the comparison does not end there. Option A's $215 strike is only $1.50 above the current price. If AAPL rallies to $220 before expiration, you are called away at $215 and miss $5 of upside. Option B gives you $6.50 of breathing room before your shares get called.

This is the core trade-off a screener surfaces: higher net credit almost always means a lower strike, which means more cap on your upside and a higher chance of assignment. The Options Industry Council (OIC) describes this as the tension between income and participation in the underlying stock's gains.

How to Use Net Credit to Compare Trades Across Different Stocks

Dollar net credit is useless for cross-stock comparisons. A $3.18 credit on a $213 stock is very different from a $3.18 credit on a $45 stock. Use these three normalized metrics instead.

1. Net credit as a percentage of stock price. Divide the net credit by the current stock price. In the AAPL example above, $3.18 ÷ $213.50 = 1.49%. This is your static return — what you earn if the stock stays flat and the option expires worthless.

2. Annualized static return. Multiply the percentage by (365 ÷ days to expiration). For a 30-day trade: 1.49% × (365 ÷ 30) = 18.1%. This lets you compare a 30-day AAPL trade against a 45-day MSFT trade on equal footing.

3. If-called return. Add any capital gain (or subtract any loss) from assignment to the net credit, then divide by the stock's current price. If AAPL is at $213.50 and you sell the $215 call for a $3.18 net credit, your if-called return is ($3.18 + $1.50 gain on stock) ÷ $213.50 = 2.19% over 30 days, or about 26.7% annualized.

Most quality screeners calculate all three automatically. When you sort by annualized static return, you are ranking trades by how efficiently each one converts your existing stock position into cash income — which is exactly the job of a covered call.

The Risks You Need to See Before You Sort by Highest Credit

Sorting a screener by highest net credit and picking the top result is one of the most common mistakes new covered-call writers make. Here is why that is dangerous.

High premium usually signals high implied volatility (IV). High IV means the market expects a large price move — often because an earnings report, product announcement, or macro event is coming. If the stock drops 15% after earnings, your $3.18 credit does not come close to covering the loss on your shares. The CBOE's VIX methodology and individual stock IV calculations exist precisely to price this risk into options. A screener that shows IV alongside net credit helps you see this clearly.

Deep in-the-money calls carry assignment risk from day one. If you sell a call with a strike below the current stock price to chase a fat premium, you will almost certainly be called away. You lose the shares and any future upside. The IRS treats the assignment as a sale of your stock, triggering a capital gain or loss in the tax year of assignment — potentially converting a long-term gain into a short-term one if the holding period is disrupted. Canadian investors should note that the CRA has similar rules around option assignment and adjusted cost base.

Bid-ask spreads widen on high-IV names. The screener's displayed net credit may look great, but if the spread is $0.40 wide, your actual fill could be $0.15 to $0.20 below the bid you see on screen. Always check the spread, not just the premium.

Finally, a high annualized return on a 7-day trade is not the same as actually earning that return 52 times a year. Transaction costs, assignment risk, and the time needed to re-establish positions all reduce real-world results.

A Simple Screening Workflow Using Net Credit

Here is a repeatable process for using net credit in a screener without getting burned by the highest-number trap.

Step 1 — Filter by stocks you already own or are willing to own at the strike price. Never sell a covered call on a stock you would not want to hold if it dropped 20%.

Step 2 — Set a minimum net credit percentage. Many experienced writers target 1% to 2% of stock price per month as a starting benchmark. Filter out anything below your floor.

Step 3 — Filter out earnings. Remove any trade where an earnings announcement falls before expiration. The OIC notes that earnings events cause IV crush after the report, which can distort premium comparisons dramatically.

Step 4 — Check the bid-ask spread. If the spread is wider than 10% of the bid price, the net credit you see on screen is unreliable. Skip it or use a limit order placed at the midpoint.

Step 5 — Compare annualized static return across your remaining candidates. Sort by this column, not raw dollar credit.

Step 6 — Review delta. A delta of 0.20 to 0.35 on the call you are selling is a common range for writers who want income without giving up most of their upside. Higher delta means higher premium but also higher assignment probability.

This six-step process turns a screener from a list of numbers into a decision tool. Net credit is the anchor, but it only makes sense in context.

Quick Reference: Net Credit Terms Your Screener Uses

Different screeners use different labels for the same concepts. Here is a plain-English translation of the most common ones.

- Net credit / Net premium: Cash collected per share after fees. Same thing. - Static return: Net credit ÷ stock price. What you earn if the stock does not move. - If-called return: (Net credit + strike gain or loss) ÷ stock price. What you earn if assigned. - Annualized return: Either static or if-called return scaled to a 365-day year. - Downside protection: Net credit ÷ stock price, expressed as the percentage the stock can fall before you lose money on the combined position. - Intrinsic value: How far the call is in the money. A $213.50 stock with a $210 strike has $3.50 of intrinsic value. - Extrinsic value / Time value: The portion of the premium above intrinsic value. This is what decays to zero at expiration — and it is the covered-call writer's friend.

When you understand these terms, you can use any screener confidently, regardless of what it calls each column.

Is net credit the same as net premium in a covered call screener?

Yes, net credit and net premium refer to the same thing: the cash you collect after fees when you sell a covered call. Some screeners use one term, some use the other, but both mean the option's bid price minus commissions and exchange fees. Always confirm whether your screener is showing the bid price or the midpoint, because fills typically happen closer to the bid.

How do I compare covered call trades on different stocks using net credit?

Divide the net credit by the current stock price to get a percentage, then annualize it by multiplying by 365 divided by days to expiration. This gives you an annualized static return you can compare across any stock or expiration date. Raw dollar credits are misleading because a $3 premium on a $50 stock is very different from a $3 premium on a $200 stock.

Why does my screener show a higher net credit than what I actually received?

Screeners often display the midpoint of the bid-ask spread rather than the actual bid price, which is where your sell order fills. The wider the spread, the bigger the gap between the displayed figure and your real fill. Always look at the bid price specifically, and subtract your broker's per-contract commission to estimate your true net credit before placing the trade.

Does selling a covered call for a high net credit mean it is a better trade?

Not automatically. High net credits usually come with lower strike prices, higher assignment risk, or elevated implied volatility around an upcoming event like earnings. The Options Industry Council (OIC) emphasizes that premium size must be weighed against the probability of assignment and the cap it places on your stock's upside. Use annualized static return and delta together, not just the dollar credit.

How does the IRS treat the net credit I receive from selling a covered call?

The IRS generally treats the premium received as short-term capital gain in the year the option expires, is bought back, or results in assignment of your shares. If the call is assigned, the premium is added to the proceeds from the stock sale, which can affect whether your stock gain is short-term or long-term depending on your holding period. Consult a tax professional for your specific situation, as IRS Publication 550 covers investment income and expenses in detail.

What net credit percentage per month should I target when screening covered calls?

Many experienced covered-call writers use a rough benchmark of 1% to 2% of stock price per month as a starting filter, though the right target depends on your risk tolerance and how much upside you are willing to cap. Targeting much higher than 2% per month often means selling deep in-the-money calls or trading through earnings, both of which carry significantly more risk. Start with your floor percentage, then use delta and spread width to narrow the list further.