How to Find and Sell a Covered Call on E*TRADE Power E*TRADE: Step-by-Step Tutorial

The Short Answer: Selling a Covered Call on Power E*TRADE

To sell a covered call on Power E*TRADE, open the options chain for a stock you already own at least 100 shares of, right-click the bid price on the call side, and select 'Sell.' The platform builds the order ticket automatically. You collect the premium upfront, and your shares serve as the collateral.

This tutorial walks you through every click — from pulling up the chain to confirming the order — using Apple (AAPL) as a live example. It also covers the real risks you take on when you write a call, so you go in with clear eyes.

What You Need Before You Start

Three things must be in place before you can sell a covered call on any brokerage, including E*TRADE.

**1. Options approval at Level 1 (covered calls).** E*TRADE requires you to apply for options trading. Covered calls are the most basic level — Level 1 — because you already own the underlying shares. FINRA Rule 2360 requires brokers to assess your experience and financial situation before granting options access. If you haven't applied yet, go to My Profile → Account Preferences → Options Trading and complete the application.

**2. At least 100 shares of the stock.** One standard options contract covers exactly 100 shares. If you own 250 shares of AAPL, you can sell a maximum of two covered calls (covering 200 shares). The remaining 50 shares are uncovered and cannot back a third contract.

**3. A margin or standard brokerage account.** Covered calls can be sold in cash accounts, IRAs, and margin accounts. E*TRADE allows covered calls in IRAs, which is worth knowing for tax-advantaged income. The IRS treats options income differently depending on account type — consult a tax professional for your specific situation.

Navigating to the Options Chain in Power E*TRADE

Power E*TRADE is E*TRADE's browser-based advanced platform (separate from the standard site and the mobile app). Log in, then follow these steps.

**Step 1 — Open the platform.** From the main E*TRADE site, click 'Trading' in the top nav, then 'Power E*TRADE.' The platform opens in a new browser tab.

**Step 2 — Search your ticker.** Type your ticker in the search bar at the top center. For this example, type AAPL and press Enter. You land on the AAPL quote page.

**Step 3 — Open the options chain.** Click the 'Options' tab just below the price chart. The chain loads with calls on the left, puts on the right, and expiration dates listed across the top or in a dropdown. By default, Power E*TRADE shows the nearest weekly expiration. You can toggle to monthly expirations using the expiration dropdown.

**Step 4 — Choose your expiration.** Most covered-call writers target 30–45 days to expiration (DTE). That window tends to offer the best balance of premium collected versus time for the stock to move against you. Select an expiration roughly 30–45 days out from today's date.

Picking a Strike Price: A Real AAPL Example

Let's say AAPL is trading at $213.50 today. You own 100 shares. You want to sell one covered call expiring in 38 days.

**Reading the chain.** The options chain shows each strike in the center column. To the left you see the call side: Bid, Ask, Last, Volume, Open Interest, Delta, and Implied Volatility (IV). Focus on the Bid price — that is the most you will realistically collect when you sell.

**Choosing a strike.** Three common approaches: - *Out-of-the-money (OTM) call:* Strike above the current price. Example — the $220 strike shows a Bid of $2.85. You collect $285 (2.85 × 100) and keep your upside up to $220. - *At-the-money (ATM) call:* Strike nearest the current price. The $213 or $215 strike might show a Bid of $4.60, collecting $460, but your upside is capped right away. - *Deep OTM call:* Strike well above current price, say $230. Bid might be only $0.55, collecting $55. Lower income, but much more room for the stock to run.

**The delta shortcut.** Delta on the options chain tells you roughly the probability the option finishes in the money. A delta of 0.30 means roughly a 30% chance of assignment. Many covered-call writers target a delta between 0.20 and 0.35 for a balance of premium and safety. The OIC (Options Industry Council) explains delta in detail in its free education library.

**Our example trade.** You select the $220 call expiring in 38 days. Delta is 0.28. Bid is $2.85. You will sell one contract and collect $285 before commissions.

Placing the Order in Power E*TRADE

**Step 1 — Initiate the order.** In the options chain, right-click (or hover and click the action icon) on the $2.85 Bid price in the $220 call row. Select 'Sell.' Power E*TRADE opens an order ticket pre-filled with: Action = Sell to Open, Symbol = AAPL, Expiration = your chosen date, Strike = 220, Type = Call, Quantity = 1.

**Step 2 — Set order type and price.** The default is a Limit order at the Bid price. Do not change this to a Market order — options spreads can be wide, and a market order may fill at a worse price. You can try pricing your limit slightly above the Bid (for example, $2.90) to see if the market comes to you, but be prepared to lower it toward the Bid if you want a fast fill.

**Step 3 — Review the order details.** Power E*TRADE shows you: - Credit received: $285.00 - Max gain: $285 (if AAPL stays below $220 at expiration) - Max loss: Substantial (explained in the risk section below) - Breakeven at expiration: $213.50 − $2.85 = $210.65

**Step 4 — Confirm and send.** Click 'Preview Order,' review one more time, then click 'Place Order.' The order appears in your Order Status tab. Once filled, the $285 credit lands in your account immediately. Your 100 AAPL shares are now flagged as collateral — you cannot sell them without first closing the call.

Risks You Must Understand Before Writing Any Call

Covered calls are often described as conservative, and compared to naked calls they are. But they carry real risks that belong front and center, not in fine print.

**Capped upside.** If AAPL jumps to $240 before expiration, you still sell your shares at $220 (your strike). You miss $20 per share — $2,000 — in gains above the strike. The $285 premium does not come close to covering that opportunity cost.

**You still own the downside.** If AAPL drops from $213.50 to $185, you lose $28.50 per share ($2,850) on the stock position. The $285 premium offsets only about $2.85 of that drop. Covered calls reduce your cost basis slightly; they do not protect you from a large decline. FINRA and the SEC both require brokers to disclose this risk in options agreements.

**Early assignment.** American-style options (which AAPL options are) can be exercised by the buyer at any time before expiration. If AAPL rises sharply and the call goes deep in the money, you may be assigned before expiration. Power E*TRADE will notify you, and your shares will be sold at the strike price. This is not a disaster — you keep the premium and sell at your strike — but it can create an unexpected taxable event.

**Tax treatment.** The IRS taxes short-term options premiums as ordinary income in most covered-call scenarios. If your call is 'qualified,' the holding period on your stock may be affected. The IRS Publication 550 covers investment income and expenses, including options. Canadian investors should review CRA guidance on options income, as treatment differs from the US. Always consult a qualified tax professional.

Managing the Trade After You Sell

Selling the call is not the end of the job. You have three main choices as expiration approaches.

**Let it expire worthless.** If AAPL stays below $220, the call expires with no value. You keep the full $285 premium, your 100 shares, and you can sell another call the next cycle. This is the ideal outcome for most covered-call writers.

**Buy it back to close early.** If the call has lost most of its value — say it drops to $0.30 with two weeks left — many traders buy it back for $30 and lock in $255 of the $285 profit. This frees up the shares and lets you sell a new call sooner. In Power E*TRADE, go to Positions, right-click the short call, and select 'Buy to Close.'

**Roll the position.** If AAPL is approaching $220 and you want to avoid assignment, you can roll: buy back the $220 call and simultaneously sell a higher strike or later expiration. Power E*TRADE supports this as a single spread order under the 'Roll' option in the Positions tab, which keeps your transaction costs lower than two separate orders.

The OIC recommends having a plan for all three scenarios before you enter the trade — not after the stock starts moving.

Do I need special options approval to sell covered calls on E*TRADE?

Yes. E*TRADE requires you to apply for options trading and be approved for at least Level 1, which covers writing covered calls. FINRA Rule 2360 requires all brokers to evaluate your experience and financial situation before granting access. The application is in My Profile → Account Preferences → Options Trading and usually takes one to two business days.

Can I sell covered calls in my E*TRADE IRA?

Yes, E*TRADE allows covered calls in Traditional and Roth IRAs at the appropriate options approval level. Because IRAs have contribution limits and no margin, you must own the shares outright in the account. The IRS has specific rules about options in retirement accounts, so confirm the tax treatment with a qualified tax professional before trading.

What happens if my covered call gets assigned early on E*TRADE?

If the buyer exercises early, E*TRADE will sell your 100 shares at the strike price and deposit the proceeds in your account. You keep the premium you already collected. Early assignment most often happens when a call is deep in the money close to expiration or just before an ex-dividend date, so watch your positions around those dates.

How do I close a covered call position before expiration on Power E*TRADE?

Go to the Positions tab in Power E*TRADE, find your short call, right-click it, and select 'Buy to Close.' Enter a limit price near the current Ask and submit the order. Once filled, your shares are released as collateral and you can sell a new call or sell the shares freely.

What strike price and expiration should I choose for a covered call?

Most covered-call writers target an expiration 30–45 days out and an out-of-the-money strike with a delta between 0.20 and 0.35. That range typically offers a reasonable premium while leaving some room for the stock to rise before you get called away. The right choice depends on your income goal, your willingness to sell the shares, and current implied volatility levels.

Is the premium I collect from a covered call taxed as ordinary income?

In most cases, yes — the IRS treats premiums from short options as short-term capital gains or ordinary income, depending on how the position closes. Writing a covered call can also affect the holding period of your underlying shares if the call is not 'qualified' under IRS rules. Review IRS Publication 550 and speak with a tax professional to understand your specific situation; Canadian investors should consult CRA guidance, as rules differ.