Every investor wants to lock profit in the stock market, and if you are an investor and looking for the easiest way to jump on profit in the stock market, selling a call option is one of the best ways you must consider. There are a lot of trading platforms available in the trading market, but the one that can protect your money, look after your transactional security, and provide seamless transactions is the best you can rely upon.
And when we talk about the best financial services companies, Robinhood is the name that first comes to investors’ minds. If you want to earn money by selling a call option, Robinhood is the perfect option for you. The team at Robinhood continuously works on identifying the best strategies that can generate good results.
If you too are looking to sell a call option on Robinhood, you have hit the right place. In this blog, we will share the complete information on how to sell the call option on Robinhood with a step by step guide.
So, let’s get started.
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Key Highlights
To sell a call option on Robinhood you need to follow these steps. We have also covered each step below in detail.
- Login to Robinhood Platform, and click contracts.
- Open the Trade option and click on Sale.
- Insert the number of contracts that you are considering for selling.
- Pick an appropriate contract.
- Enter the limit price and click on the Submit button.
Options Trading on Robinhood
If you are new to the stock market you might consider the term “options trading” a complicated one. But believe me, it’s not. Not at all..!!
Options trading is an agreement between the buyer and seller. Various security features are there that derive its value. These agreements are called derivatives that are a part of financial instruments.
Options trading is very simple and easy and you can use this in different ways depending upon your goals. Your goal might be either to earn extra income from your stock investment or to protect yourself from the risk of loss in a time of recession.
Always keep in mind that trading options are comparatively risky than an investment in stocks. In trading options, the risk of potential loss is higher, or you might end up losing all your investment. If you want to trade on Robinhood, it requires prior approval.
But there are some strategies, if you can apply then you can earn good profit from options trading. You can secure your profit by selling a call option on Robinhood. Let’s understand it deeply.
How to Sell a Call Option on Robinhood?
Investors can consider selling a call option on Robinhood whenever they wish for a profit through stock after their price increases. It is a flexible step-by-step process that helps traders in reducing the risk of loss when the value of the portfolio is in a bearish trend.
It’s just a three-step process. Grab the step-by-step guide to sell a call option on Robinhood.
Step 1
Open the Robinhood app with your credentials and check out the options you have decided or want to sell. Your option might be the one that is about to expire or you can also choose the one you no longer want to keep investing in. You can also sell more than one stock at a time. You just need to set aside the stocks you want to sell.
Step 2
After selecting the stocks you want to sell, you just need to click on the trade icon and insert the number of stocks you are going to sell. After that, you have to place a limit price on which you want to sell your selected stock.
Step 3
After placing a limit, click on the submit button to close the process. But before submitting, just check out the preview and activity summary that you have done in steps 1 and 2.
Types of Call Option You Can Sell on Robinhood
There are two types of call options on Robinhood
- Covered Calls
- Naked Calls
Covered Calls
The covered call is an investing strategy that includes selling call options. If you want to generate extra income from shares, you have an option to buy against stock that you already have and purchased recently. Here sellers have the advantage over the buyer who purchased the shares at lower prices. And the profit of the seller is calculated on the increased stock prices. The stock option you sell is covered as you already bought enough shares to cover the transaction.
Naked Calls
In Naked Calls, the Investor sells call options without owning the underlying security. This is a very risky call option because stock prices can swing in any direction. The maximum profit an investor can make in this call option is the premium received by the investor upfront. Since the investor doesn’t have the underlying stock, the potential stock is not able to protect the seller. The investor who chooses the Naked call option will have the only option left, which is to buy stocks at a current market price.
What is the Right Time to Sell a Call option on Robinhood?
If you have a belief that underlying stock prices will increase in the near future then you choose a call option on Robinhood. You bet that the underlying stock prices will not rise above the strike price of the option.
The best thing about selling a call option is that you will get the opportunity to book profit on the stocks you already have in your portfolio. For each stock, you will receive a premium and you can easily adjust your profits over the losses if in case.
It all depends on the strategy you use. If you take a decision strategically you will earn good revenue but if you fail to make a proper strategy and the stock price crosses the strike price, you will be assigned a call and you can lose the profit you might earn either. If the call is assigned, don’t forget that you are responsible for selling the underlying stock to the buyer.
Always remember, if the prices rise before the date of expiry, you have the opportunity to call the option and lock in lower prices. If you want to sell a call option before the expiration date just follow the below steps.
Steps to Sell a Call Option Before Expiration Date
- First of all, you need to understand all the concepts of call options like strike prices, put options, premium price, out-of-money, and expiration date.
- Deeply review investment plans so that you are able to choose those stock options that can gain your financial help.
- Grab the proper knowledge of the underlying asset so that you can decide to keep or sell the stock before the expiry date.
- Figure the gain percentage that you can make or like to make by keeping the option or allowing the investment to expire.
Thoughts
Robinhood app is packed with many great features that make trading smooth and flexible. All the information regarding the call option on Robinhood, including the expiration date, strike price, premium, etc are available in the app. If you are a beginner and want to join the trading or you are an experienced trader, all the information you require for the call option is contained in this blog. Just go through the information and you will all set to apply the call option on Robinhood.
Good Luck..!!
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