How to Sell a Covered Call on Fidelity Active Trader Pro for the First Time

The Short Answer: Yes, You Can Do This in About Five Minutes

You can sell a covered call on Fidelity Active Trader Pro by opening the Trade Bar, selecting "Options," entering your ticker, choosing a strike and expiration, and submitting a Sell-to-Open limit order. You need to already own at least 100 shares of the stock and have options trading approved on your account. Once those two boxes are checked, the whole process takes less than five minutes.

What You Need Before You Place the Trade

Before you touch the platform, confirm three things.

First, you own at least 100 shares of the underlying stock. One standard options contract covers exactly 100 shares. If you own 250 shares, you can sell a maximum of two contracts and keep 50 shares uncovered.

Second, your Fidelity account has options approval at Level 1 or higher. Covered calls are a Level 1 strategy at Fidelity, which is the most basic tier. To apply or check your current level, go to Accounts & Trade → Account Features → Brokerage & Trading → Options. FINRA Rule 2360 requires brokers to verify that options trading is appropriate for each customer before granting access, so Fidelity will ask about your income, net worth, and trading experience.

Third, you are using a margin or standard brokerage account. Covered calls are permitted in IRAs at Fidelity as well, but the approval process has a separate step. If you are trading in a registered account in Canada, the CRA treats options premiums as income or capital gains depending on your trading frequency — worth confirming with a tax professional before you start.

If all three boxes are checked, you are ready to open Active Trader Pro.

A Real Worked Example: Selling a Covered Call on AAPL

Let's walk through a concrete trade so the platform steps have real numbers attached.

Assume it is a Tuesday morning and AAPL is trading at $213.50. You own 100 shares. You decide to sell one out-of-the-money (OTM) call with a strike of $220, expiring in 18 days (the nearest monthly expiration). The bid on that contract is $1.85 and the ask is $1.95.

Your target: collect roughly $190 in premium (100 shares × $1.90 mid-price) in exchange for agreeing to sell your AAPL shares at $220 if the buyer exercises the contract.

Here is how you enter that trade in Active Trader Pro:

1. Open Active Trader Pro and find the Trade Bar at the top of the screen. 2. Type AAPL in the symbol box and press Enter. 3. Click the Action dropdown and select "Sell to Open." 4. Change the instrument type from "Shares" to "Options." 5. The options chain will appear. Select the expiration date — in this case the monthly expiration 18 days out. 6. Find the $220 strike in the Calls column. You will see the bid ($1.85) and ask ($1.95). 7. Set Quantity to 1 (one contract = 100 shares). 8. Set Order Type to Limit and enter a limit price of $1.90 (the midpoint). Starting at the mid is a reasonable first attempt; you can lower toward the bid if it does not fill. 9. Set Time-in-Force to Day or Good-till-Canceled (GTC). Day is fine for liquid names like AAPL. 10. Click Preview Order, review the details, then click Place Order.

If filled at $1.90, Fidelity credits $190 to your account immediately. That cash is yours to keep regardless of what AAPL does next.

What Happens After the Order Fills?

Once the order fills, Fidelity automatically places a hold on your 100 AAPL shares. You will see them marked as "covered" in your positions. You cannot sell those shares without first buying back the call — doing so would leave a naked short call, which requires a higher options approval level and is a very different risk profile.

From here, three outcomes are possible at expiration:

Outcome 1 — AAPL stays below $220. The call expires worthless. You keep the $190 premium and still own your shares. You are free to sell another call the following week or month.

Outcome 2 — AAPL closes above $220 at expiration. The call is likely exercised. Fidelity sells your 100 shares at $220. You keep the $190 premium plus the gain from $213.50 to $220 ($650). Total proceeds: $22,190 versus a cost basis of $21,350 (at today's price). You no longer own the shares.

Outcome 3 — You want to close early. Buy back the call (Buy to Close) before expiration. If AAPL dropped to $205 and the call is now worth $0.40, you buy it back for $40 and pocket the $150 difference. This frees your shares and locks in most of the premium.

The OIC (Options Industry Council) publishes free educational material on all three outcomes at their website — worth bookmarking if you want deeper reading.

Risks You Should Understand Before You Trade

Covered calls are one of the most conservative options strategies, but they are not risk-free. Here are the honest trade-offs.

Capped upside. If AAPL rockets to $240, you still sell at $220. You miss $20 per share of gain above the strike. The premium you collected does not make up for that in a strong bull run.

You still own the downside. If AAPL falls to $180, you lose $33.50 per share on the stock. The $1.90 premium softens that loss slightly — your effective cost basis drops from $213.50 to $211.60 — but it does not protect you from a large drop. Covered calls are not a hedge against a falling stock.

Early assignment. American-style options (which AAPL uses) can be exercised by the buyer at any time before expiration. Early assignment is rare but happens most often just before an ex-dividend date. CBOE data shows early assignment spikes when a call is deep in the money and the dividend is large relative to the remaining time value. Check AAPL's dividend calendar before selling.

Bid-ask spread costs. On less liquid names, the spread between bid and ask can be wide. Selling at the mid or better is important. FINRA reminds retail investors to compare the natural price of an options order against the National Best Bid and Offer (NBBO) before submitting.

Tax treatment. The IRS treats covered call premiums as short-term capital gains in most cases, reported in the tax year the position closes. If your call is "qualified" under IRS rules (generally OTM and not too long-dated), it does not affect the holding period of your stock. If it is "unqualified" — deep in the money or very long-dated — it can suspend your long-term holding period clock. IRS Publication 550 covers this in detail. Canadian investors should check CRA guidance on options income, as the tax treatment differs from the US.

Quick Tips to Get Better Fills on Fidelity Active Trader Pro

A few practical habits will improve your results from day one.

Trade during market hours with tight spreads. The best liquidity on equity options is typically between 9:45 a.m. and 3:45 p.m. Eastern. Avoid placing orders in the first and last 15 minutes when spreads widen.

Start at the mid-price. Enter your limit at the midpoint of the bid-ask spread. For the AAPL example above that was $1.90. If it does not fill in 5-10 minutes, lower by $0.05 increments toward the bid.

Use the Active Trader Pro options chain view. Right-click any strike to see Greeks (delta, theta, implied volatility). For a first covered call, look for a delta between 0.20 and 0.35 on the call side. That range typically means the market assigns a 20-35% probability of the call finishing in the money — a reasonable balance between premium collected and the chance of keeping your shares.

Check open interest and volume. Strikes with open interest above 500 and daily volume above 100 contracts are generally liquid enough for retail-sized orders. Active Trader Pro displays both columns in the options chain.

Set a mental exit rule before you enter. Many experienced covered-call sellers buy back the call if it loses 50-80% of its value (meaning they have captured most of the premium early) or if it doubles in price against them (meaning the stock has moved sharply higher and they want to avoid assignment). Deciding this in advance removes emotion from the decision.

Do I need a margin account to sell covered calls on Fidelity?

No. Fidelity allows covered calls in both cash and margin accounts, as well as in IRAs with the appropriate options approval. A margin account is not required because the shares you already own serve as the collateral. You do need at least Level 1 options approval, which you can apply for inside your account settings.

How much money do I need to sell one covered call on Fidelity?

You need to own at least 100 shares of the underlying stock — there is no additional cash deposit required for a covered call. Using the AAPL example above, owning 100 shares worth roughly $21,350 is your only capital requirement. The premium you collect ($190 in the example) is credited to your account immediately after the fill.

What options level do I need at Fidelity to sell covered calls?

Covered calls require Level 1 options approval at Fidelity, which is the entry-level tier. You apply through Accounts & Trade → Account Features → Brokerage & Trading → Options. Fidelity will ask about your investment experience and financial situation as required by FINRA Rule 2360 before granting access.

Can I sell a covered call on Fidelity in my IRA or Roth IRA?

Yes, Fidelity permits covered calls in Traditional and Roth IRAs, but you must apply for options trading specifically within the IRA — approval on a taxable account does not automatically carry over. Because IRAs have contribution limits and no margin, Fidelity requires the position to be fully covered by shares held in that same account.

What happens if my covered call gets assigned on Fidelity?

If the call is exercised, Fidelity automatically sells your 100 shares at the strike price and credits the proceeds to your account, usually by the next settlement date. You keep the premium you already collected, and the shares are gone. You will receive a trade confirmation and the transaction will appear in your account history.

How do I close a covered call early on Fidelity Active Trader Pro?

To close early, place a Buy to Close order on the same contract — same ticker, same strike, same expiration. In Active Trader Pro, go to your Positions tab, right-click the short call, and select Close Position, or manually enter a Buy to Close order in the Trade Bar. Once filled, the hold on your shares is released and you are free to sell them or write a new call.