How to Find and Sell a Covered Call Using the Power E*TRADE Options Chain

The Short Answer: Here Is Exactly How to Do It

To sell a covered call on Power E*TRADE, open the platform, pull up the options chain for a stock you already own at least 100 shares of, choose a strike price above the current stock price, and sell one call contract per 100 shares using a limit order at or near the bid price. The whole process takes under five minutes once you know where to click. This walkthrough shows every step using a real Apple (AAPL) example so you can follow along on your own screen.

What You Need Before You Start

Three things must be in place before you place a single trade.

First, you need at least 100 shares of the underlying stock sitting in your E*TRADE brokerage account. Covered calls are sold in contracts, and one contract controls exactly 100 shares. If you own 250 shares, you can sell a maximum of two contracts.

Second, your account must be approved for options trading at Level 1 (covered calls are the most basic options strategy). Log in, go to Account > Settings > Options Trading, and apply if you have not already. E*TRADE typically approves Level 1 within one business day. FINRA Rule 2360 requires brokers to collect suitability information before granting options approval, so expect a short questionnaire about your income, net worth, and trading experience.

Third, switch from the standard E*TRADE web platform to Power E*TRADE. Power E*TRADE is free for all account holders and lives at us.etrade.com/e/t/poweretrade. It has a dedicated options chain view that makes strike selection and order entry much faster than the basic platform.

Navigating the Power E*TRADE Options Chain

Once you are inside Power E*TRADE, type your ticker in the search bar at the top — use AAPL for this example. The quote page loads with a row of tabs near the top: Overview, Charts, Options, News, Fundamentals. Click Options.

The options chain opens in a split layout. Calls appear on the left side, puts on the right, and expiration dates run across a horizontal selector at the top. By default, Power E*TRADE shows the nearest weekly expiration. You can toggle between weekly and monthly expirations using the date selector.

Each row in the call side shows: Bid, Ask, Last, Volume, Open Interest, Delta, Implied Volatility (IV), and the Strike price in the center column. These are the numbers you will use to pick your trade.

One quick orientation tip: the chain is color-coded. Strikes that are in-the-money (ITM) — meaning the strike is below the current stock price for calls — appear with a shaded background. Out-of-the-money (OTM) strikes have a white background. For a standard covered call, you want an OTM strike, so look at the white rows above the current stock price.

Worked Example: Selling a Covered Call on AAPL

Let's say AAPL is trading at $213.50 on a Tuesday morning. You own 100 shares. You want to collect premium without giving up too much upside.

Step 1 — Pick an expiration. Click the date selector and choose the Friday that is 21 days out (roughly three weeks). Options traders often target the 21-to-45 day window because time decay, measured by theta, accelerates most reliably in that range, according to the Options Industry Council (OIC).

Step 2 — Pick a strike. Scroll to the OTM call side. You see the $217.50 strike showing a Bid of $2.18 and an Ask of $2.22, with a Delta of 0.28. A delta near 0.25-0.30 means the market is pricing roughly a 25-30% chance the stock closes above that strike at expiration. That is a common starting zone for income-focused covered call sellers.

Step 3 — Check open interest and volume. The $217.50 strike shows 4,200 open interest and 380 contracts traded today. Healthy liquidity. A tight bid-ask spread of $0.04 confirms you can get filled close to the midpoint.

Step 4 — Enter the order. Hover over the $217.50 row and click Sell in the Bid column. Power E*TRADE auto-populates an order ticket on the right side of the screen. It will show: Action = Sell to Open, Quantity = 1, Expiration = your chosen date, Strike = $217.50, Type = Call. Change the order type from Market to Limit. Set your limit price at $2.20 — the midpoint of the $2.18/$2.22 spread. Click Preview Order, review the details, then Place Order.

Step 5 — Confirm the fill. Your order typically fills within seconds during market hours for a liquid name like AAPL. Go to Positions to confirm. You will see your 100 AAPL shares and, directly below, a short call position showing -1 AAPL 217.50 Call [expiration date].

The $2.20 premium you collected equals $220 in cash (100 shares × $2.20), credited to your account immediately. That $220 is yours to keep regardless of what happens next — it is not refundable to the buyer.

Risks You Need to Understand Before Selling

Covered calls reduce risk compared to holding stock outright, but they do not eliminate it. Here are the three risks that matter most.

Capped upside. If AAPL rockets to $230 before expiration, your shares get called away at $217.50. You collected $2.20 in premium, so your effective sale price is $219.70 — but you miss the move from $219.70 to $230. That is the core trade-off: you exchange unlimited upside for a fixed premium payment.

Stock still drops. The $2.20 premium offsets only $2.20 of a stock decline. If AAPL falls from $213.50 to $195, you lose $18.50 per share on the stock position, partially offset by the $2.20 premium, for a net loss of $16.30 per share. The covered call does not protect you from a large drop.

Early assignment. American-style equity options can be exercised by the buyer at any time before expiration. Early assignment is rare for OTM calls, but it can happen around ex-dividend dates when the call is deep ITM. The SEC's investor education materials note that assignment can occur at any time, so always know your stock's upcoming dividend dates before selling a call.

If you are uncomfortable with any of these outcomes, do not place the trade. The OIC offers free educational resources at their website to help you model scenarios before committing real capital.

Managing the Trade After You Sell

You have three choices as expiration approaches.

Let it expire worthless. If AAPL stays below $217.50, the call expires with no value. You keep the $220 premium and still own your 100 shares. This is the best-case outcome for most covered call sellers.

Buy it back early. Power E*TRADE makes this easy. Go to Positions, click on the short call, and select Buy to Close. Many traders close the position when the call has lost 50-80% of its value — for example, buying back at $0.55 when you sold at $2.20. This locks in most of the profit and frees you to sell a new call for the next cycle.

Roll the position. Rolling means buying back the current call and simultaneously selling a new call at a later expiration or higher strike. In Power E*TRADE, right-click the short call in your Positions tab and select Roll. The platform opens a spread order ticket pre-populated with the buy-to-close leg, and you choose the new expiration and strike for the sell leg.

On the tax side: premiums collected from selling covered calls are generally treated as short-term capital gains in the US, taxed as ordinary income in the year the position closes. The IRS has specific rules around qualified covered calls that can affect the holding period of your underlying shares — consult IRS Publication 550 or a tax professional before year-end. Canadian investors should note that the CRA treats option premiums as capital gains or income depending on your trading frequency and intent.

Quick Tips for Getting Better Fills on Power E*TRADE

Always use limit orders, never market orders. Options spreads can be wide, and a market order on a thinly traded strike can cost you $0.10-$0.30 per share versus the midpoint.

Trade during the middle of the day. The first 30 minutes and last 30 minutes of the trading session tend to have wider spreads and more erratic pricing. The 10:30 AM to 3:00 PM ET window generally offers tighter markets.

Filter by open interest. In the Power E*TRADE chain, click the column header to sort by Open Interest. Aim for strikes with at least 500 open interest for smoother fills. For large-cap names like AAPL, MSFT, or SPY, this is rarely a problem.

Use the Analyze tab. Power E*TRADE has a built-in profit/loss diagram under the Analyze tab on the order ticket. Before you confirm, click it to see your maximum gain, breakeven price, and loss scenario plotted visually. It takes 10 seconds and can save you from a trade that does not match your actual goals.

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

Yes. You need at least Level 1 options approval, which is the entry-level tier E*TRADE offers. The application asks about your income, net worth, investment experience, and risk tolerance — FINRA requires brokers to collect this suitability information before granting options access. Most retail investors with a standard brokerage account qualify for Level 1 within one business day.

How many covered calls can I sell if I own 150 shares?

You can sell one contract, because one contract controls exactly 100 shares and you need to own the shares outright to back each contract. The remaining 50 shares cannot be used to sell a covered call — you would need to buy 50 more shares to sell a second contract. Selling a call without owning the underlying shares is a naked call, which requires much higher margin approval and carries unlimited risk.

What happens if my covered call gets assigned before expiration?

If the buyer exercises early, E*TRADE will sell your 100 shares at the strike price and credit the proceeds to your account — you also keep the premium you already collected. Early assignment on OTM calls is uncommon but can happen near ex-dividend dates when the call is deep in the money. The SEC notes that American-style options can be assigned at any time, so always check upcoming dividend dates before selling.

Is the premium I collect from a covered call taxed right away?

The premium is credited to your account immediately, but the tax event occurs when the position closes — either by expiration, assignment, or a buy-to-close trade. In the US, premiums from covered calls are generally taxed as short-term capital gains; IRS Publication 550 covers the qualified covered call rules that can affect your stock's holding period. Canadian investors should check CRA guidance, as the tax treatment depends on whether options activity is considered capital or income.

What delta should I target when selling a covered call for income?

Most income-focused covered call sellers target a delta between 0.20 and 0.35, which roughly corresponds to a 20-35% probability that the call finishes in the money at expiration. Lower delta means less premium but a smaller chance of having your shares called away; higher delta means more premium but a greater chance of assignment. The right delta depends on how much upside you are willing to give up versus how much income you want to collect.

Can I sell a covered call in an IRA on Power E*TRADE?

Yes, covered calls are permitted in IRAs at E*TRADE because they are a defined-risk strategy backed by shares you already own. You still need options approval on the IRA account specifically — approval on a taxable account does not automatically carry over. Inside a traditional or Roth IRA, the premium collected grows tax-deferred or tax-free respectively, which can make covered calls particularly efficient from a tax standpoint.