How to Sell Covered Calls

This step-by-step guide will walk you through selling your first covered call.

Prerequisites

Before you can sell covered calls:

Own at least 100 shares of a stock

Have options trading approval from your broker

Understand the risks and mechanics

Step-by-Step Instructions

Step 1: Check Your Holdings

Verify you own 100+ shares of an optionable stock.

Step 2: Open the Options Chain

In your broker's app or website, find the options chain for your stock.

Step 3: Select Expiration Date

Choose an expiration date 30-45 days out for optimal time decay.

Step 4: Choose Strike Price

Select a strike price based on your goals:

Keep shares: Choose 10%+ OTM (delta 0.15-0.20)

Balanced: Choose 5-7% OTM (delta 0.25-0.30)

Max income: Choose 2-3% OTM (delta 0.35-0.40)

Step 5: Sell to Open

Place a "Sell to Open" order. Set a limit price at the mid-point of bid-ask spread.

Step 6: Confirm Order

Review details and submit. Premium is credited immediately.

Common Mistakes to Avoid

Selling too close to the money - Higher assignment risk

Ignoring earnings dates - Volatility spike can hurt

Not having an exit plan - Know when to roll or close