How To Sell A Call Option On Robinhood

How To Sell a Call Option on Robinhood – A Complete Step-By-Step Guide

11/02/2022

To grow the portfolios on Robinhood traders are there buying and selling a call option on Robinhood. For this, they need to find the appropriate strategies that will guarantee consistent results. 

For this, they need to filter some strategies and they need to choose the one that will help them in achieving the goals that they have in their mind. So here know how to sell a call option on Robinhood.

You can set a call option on Robinhood by just logging into the platform and then you can click on the contracts. After that, you need to tap on trade and then click on sale. Then you need to enter the number of contracts that you have in mind to sell or you have planned to. 

Then you need to choose the appropriate contract and then insert the selected limit price and then submit it.

But in case you are new here then you may face difficulty while following the process. But they will get to know that the process is easier than selling stocks. 

They just need to understand how this works and also there are some details that they need to acclimatize too and also there are certain kinds of terms that they need to master.

So see here how to sell a call option on Robinhood and we will tell you each step that you need to follow in order to sell a call option. Worry not we will make it easy for the beginners too in order to follow this procedure.

How To Sell A Call Option On Robinhood

How To Sell A Call Option On Robinhood

This is a flexible step to step guide that will help the trader to reduce the risk of loss. This will help them when the portfolio’s value is on a bearish trend. Also, they might consider selling the call option in case they want to monetize the stock that is after the price rise. So follow the steps below in order to sell a call option on Robinhood.

  1. In the first step, you need to open the Robinhood platform and then you need to identify the options that are linked to contracts that you want to sell. That might be the one that is going to expire soon or the one that you no longer require and you don’t want to hold. And at this time you may decide to sell more of the contracts at one time. In this case, you need to single out the contracts that you want to sell.
  2. In the second step when you will identify the contracts that you want to sell then you need to tap on the trade icon and after that, you need to enter the number of contracts that you intend to sell. It might be necessary for you to put the limit price that you want to sell your contract at.
  3. In the third step, you are ready to make your sale. But before you execute that you need to tap on the preview button in order to view the summary activities that are there in step 1 and step 2. After that, you can swipe the page, and then you can press submit in order to complete the process.

By selling a call option on Robinhood you can hedge the risk of losses. Here you need to know that trading options are risky as compared to investing in stocks and it is simple to sell a call option. But also keep in mind that the losses could occur faster than you lose your investment. So in this case they need to get approval from Robinhood if they want to trade options.

But there are some strategies that will increase the risk and the investor need to keep in mind that there are certain kinds of risks that are involved before doing anything.

Time Taken To Sell a Call Option on Robinhood

Time Taken To Sell a Call Option on Robinhood

Here it might be difficult for you to exercise your options. There is a trick for you to sell a contract on Robinhood just before it expires. You can do it hours before. And the time it will take to sell the call option will depend on the orders. 

In this, the buyer limit may be executed at a lower price or they can set the limit price. In this case, it will take much time to sell your call option. It is an important factor to determine the duration it will take in order to sell the order. 

At the same time the time, it will take to sell the order also matters. 

There can be delays on certain days so this will lead to slow down the orders. This is the common thing that the traders face who are there trying to sell a call option on Monday morning. It will allow you to buy the specific shares at predetermined prices. 

If it rises before the expiration date then you need to call the option and also you can lock this at a lower price. 

In this case, if you want to sell a call option before the date of expiration then you need to follow the steps that we are going to tell you.

  1. Firstly you need to understand some of the concepts while selling the call option that will include strike prices, also the premium price, expiration date, put option, and in and out of money.
  2. You need to eview the investment plans and this will help you to choose the options that will meet your financial needs.
  3. This needs to study the underlying asset and this will enable you to decide whether you want to sell or exercise it before it gets expired.
  4. Also, you need to understand the value of the sale and also the profit that you are making.
  5. You need to understand the level of gain that you will make and it will decide and allow the investment to expire and exercise your option.

More Things That You Need To Know Before You Sell a Call Option

More Things That You Need To Know Before You Sell a Call Option

The first thing that you need to know here is that you can also sell a call option before it gets expire and the reason behind that is it will get derived from an instrument and that price will be pegged on the underlying stock’s price. 

In this case, the buyer needs to be free in order to dispose of the options that contract to any other person before it will reach the expiry date. This will help them to sell a call option at the current market price.

The second thing that they need to know is that they can sell a call option before it hits the strike price. In this case, you can sell a call option before you acquire it. But in this case, there is one problem that you need to be prepared in order to lose the premiums that you have paid for already that you are selling before they will cross the strike price.

The most common thing for the pocket traders is selling the options before they will hit the strike price. The reason behind this is their losses that are limited to the premium value. Due to volatility decays the premium value may surfer towards the expiry. 

You need to understand the relationship between the strike price and the current price of the asset. You need to consider this. This will help help you to determine the value of the contract and also the contract moves towards the expiration. In this case, the contract will be at the money.

This money option will occur for the investors when the stock price is equal to the strike price. So when you will attain the strike price the intrinsic value will be equivalent to the difference that is between the contract and the stock price.

Why Sell a Call Option On Robinhood?

This is the major question that may come to your mind why consider selling a call option at robinhood when there can be the case that such cases may become valueless upon the expiry date. If they become valueless then there will be a reduction in the profit and it may result in some kind of losses. You can sell the call option in two ways:

1 .Naked Call Option

Naked Call Option

This is explained as when there is no underlying stock still one sells a call option. Although this is a risky venture to test when the stock price is free to swing in either direction. Since they do not own the underlying stock so the losses will not be there to protect the call option seller. In this, call option the buyer will leave the naked seller. They do this with one alternative and that is they can buy the stock at the prevailing market price.

2. Covered Call Option

Covered Call Option

In this, the seller owns the underlying stock. When they will sell such kind of stock then there will be additional income that they will make and it will also offset the decline in stock prices. In this case, the seller will avail the buyer of the shares that they have bought at a lower price. Here the profit that is made by the seller will be pegged on the risk in the prices of the stock.

So this was all how to sell a call option on Robinhood. We told the ways how you can do that and also told the reasons why you should do that. More importantly, you can also see the consequences hereof selling a call option on Robinhood, so now you can decide for yourself. Still, if you have any other doubt then you can ask us in the comment section. 

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