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How to sell a covered call, one order field at a time

To sell a covered call, you place one order: "sell to open" one call contract for every 100 shares you own, at a limit price near the middle of the bid and ask. Here is each field on the order screen, and what to check before you press send.

Options guide · 8-minute read · Updated 2026-10-26

Before you open the order screen

A Covered call needs 100 shares of the stock in the same account. Check three things first:

• You hold at least 100 shares, fully paid, in the account you'll trade from.
• Your account is approved for options. Covered calls usually sit at the lowest options level. See options approval levels.
• You'd be fine selling the shares at the strike. If not, stop here.

This is the second leg of the wheel strategy, and it's also a strategy on its own. The covered call guide covers the why. This page is the how.

Open the chain and pick the call

Step 1: open the options chain

Find the stock on your broker and tap "Options" or "Trade options." You'll see the Options chain: dates across the top or down the side, strikes in a column, calls on one side and puts on the other.

Pick the calls side. Pick an Expiration date. Many sellers use 30 to 45 days out. Our chain guide explains every column.

Step 2: pick the strike

The Strike price is the price you agree to sell your shares at. Pick one above what you paid, and above today's price. Read its bid, ask and Delta.

Strike choice is its own decision. See covered call strike selection.

Fill in the order and check it

Step 3: fill in the order, field by field

Brokers lay this out in different ways, but the fields are the same.

Sell to open is the one field people get wrong most. If your broker has a simple "Sell" button on the option, check the preview says "to open" and "covered."

Step 4: review the preview

Before you send, the preview should show:

• A credit, not a debit. You are being paid.
• "Covered" or a note that your shares secure the call. If it says "naked" or asks for a margin requirement, stop. Something is set up wrong.
• The premium in dollars: the limit price × 100, minus fees.
• No new buying power used (or very little). Your shares are the collateral.

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

You own 100 shares of a made-up stock, XYZ, bought at $50. XYZ trades at $51. The 35-day $55 call shows a bid of $0.95 and an ask of $1.05. The middle is $1.00.

You enter: Sell to Open, 1, XYZ 35-day $55 Call, Limit $1.00, Day. It doesn't fill in two minutes. You cancel and re-enter at $0.98. It fills.

The confirmation reads something like: "Sold 1 XYZ $55 Call @ 0.98, opening. Credit $98.00, less fees." Your account now shows −1 of that call. The minus sign means you are short it.

The order part is easy. The last two rows are the real risk: your shares. Selling the call didn't change that.

Step 5: after it fills, set the buy-back order

Many sellers place a second order right away: a Buy to close limit at about half the premium, here about $0.49, good till cancelled. If the call loses half its value early, it closes on its own. That's a habit, not a rule. See covered call exit rules.

Common order mistakes

• Quantity 100 instead of 1. Most brokers block this when you don't own 10,000 shares, but check.
• Buy to Open by mistake. You'd pay a premium instead of collecting one.
• Picking the put column. Put and call rows sit side by side.
• A market order. Option spreads can be wide; a market order often fills at the bid or worse.
• Selling the call in a different account from the shares. It won't count as covered.

In Canada, covered calls are widely allowed in a TFSA or RRSP, but options permissions differ by broker. Check your broker's current help pages.

Questions