How to Sell a Covered Call Position

You can sell a covered call in one of two ways. Either way, establishing a covered call position requires a round lot, or quantity of 100, of stock and a short call against each round lot.

TABLE OF CONTENTS

• What is a Covered Call Position?
• Selling a Call on an Existing Position
• Buying Stock and Selling a Call in a Single Order

What is a Covered Call Position?

A covered call position is an options strategy that allows investors to generate income by selling a call against each round-lot, or quantity divisible by 100, of stock they own. For example, if you have 500 shares of XYZ, you can sell -5 calls against your long share position to establish a covered call position.

You can sell a covered call position in any account type or trading level, including cash accounts, as long as you own at least +100 long shares of stock.

There are two ways to establish a covered calls position:

• Selling a call against an existing round-lot of stock position
• Buying a round-lot of stock and selling the corresponding number of calls against it in a single order.

Selling a Call on an Existing Position

1. Locate a round lot of stock (quantity increment of 100).
2. Enter the symbol into the Active Symbol field.
3. Go to the Trade tab and expand the expiration you want to sell the call in.
4. Click on the Bid price on the call strike you want to sell.
5. Enter your order details.
6. Click Review & Send to review your order.
7. Click Send Order.
8. After the order fills, your covered call position will appear in the Positions tab.

Buying Stock and Selling a Call in a Single Order

1. Enter the stock symbol you wish to buy in the Active Symbol field.
2. When the stock quote appears, click on the Ask price.
3. You will be sent the Trade tab, and a stock order ticket will appear below.
4. Expand the expiration you want to sell the call in.
5. Click on the Bid price on the call strike you want to sell.
6. Enter your order details.
7. Click Review & Send to review your order.
8. Click Send Order.
9. After the order fills, your covered call position will appear in the Positions tab.