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Do I need to own the stock to sell a call?

To sell a covered call, yes, you need 100 shares for every contract. You can sell a call without the shares, but then it's "naked", and most brokers won't let a beginner do it. Here's why that's a good thing.

Options guide · 6-minute read · Updated 2026-10-26

The short answer

For a Covered call, yes. You need 100 shares per contract sitting in your account before you sell the call. The shares are what "covers" the promise to deliver them at the strike.

You can sell a call with no shares. That's a Naked call. It needs a margin account and a high options approval level, and the loss on it has no ceiling. For almost everyone reading this, the answer is: own the shares first.

New to calls? Start with options trading basics.

What "covered" actually covers

When you sell a Call option, you promise to sell 100 shares at the Strike price if the buyer asks. If you already own those shares, the promise is easy to keep. Your broker just hands them over.

If you don't own them, you'd have to buy 100 shares at whatever the market price is on that day, then sell them at the strike. If the stock has jumped, that's a loss, and there's no limit to how far a stock can jump.

That's the whole difference. Same call, same premium. One version has a cap on the damage. The other doesn't.

A worked example (an illustration, not a trade idea)

A made-up stock, XYZ, trades at $50. Two people sell the same 30-day $55 call for $1.00, collecting $100 each.

• Covered: owns 100 shares bought at $50.
• Naked: owns no shares.

Then XYZ gets a takeover offer and jumps to $70. The buyer exercises. Both sellers must deliver 100 shares at $55.

The covered seller missed the big gain above $55. That stings, but it's a known cost. The naked seller lost $1,400 to collect $100, and every extra dollar the stock rose cost another $100.

Why brokers block naked calls for beginners

Brokers rank options approval in levels. Covered calls usually sit at the lowest level, because the shares cover the risk. Naked calls sit at the top, because the broker is on the hook if your account can't pay for the shares.

To sell naked calls, you need a margin account, a track record, and enough cash to meet a margin call fast. Permissions differ by broker, in the US and in Canada. If your broker won't approve you, that's a guardrail, not an insult.

What if I only own 60 shares?

Then you can't sell a covered call yet. One contract is always 100 shares. Fractional shares don't count. See can I sell covered calls on fractional shares?

Your choices are to buy the rest, or wait. Buying 40 more shares just to sell a call means you now own more of a stock you may not have wanted that much of. Make that decision as a stock decision first.

What to do instead of a naked call

If you like a stock and want to be paid to wait, sell a put you can afford instead. A cash-secured put has a known worst case: the strike times 100, minus the premium. See do I need the cash to sell a put?

Puts and covered calls taken in turn make up the wheel strategy. Both halves are covered. Neither has an open-ended loss. That's why they're the two most people start with.

The catch is still real: owning 100 shares means the full downside of the stock. Read what's the catch with selling options? before your first one.

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