How to Sell a Covered Call on Fidelity Active Trader Pro: Step-by-Step Guide

The Short Answer: Here Is Exactly How to Do It

To sell a covered call on Fidelity Active Trader Pro, open the platform, pull up the options chain for a stock you already own at least 100 shares of, right-click the bid price on the call side, select 'Sell,' confirm the order details, and submit. The whole process takes under two minutes once your account has options approval. This guide walks you through every click, with a real example using Apple (AAPL) so you can follow along.

What You Need Before You Place the Trade

Three things must be in place before you can sell a covered call on Fidelity.

First, you need options trading approval. Fidelity uses a tiered approval system. Covered calls require Level 1 options approval (sometimes listed as 'Covered Call Writing'). If you have not applied, log in to Fidelity.com, go to Accounts & Trade > Account Features > Brokerage & Trading > Options, and submit the application. FINRA Rule 2360 requires brokers to collect information about your experience and financial situation before granting options access, so expect a short questionnaire.

Second, you need at least 100 shares of the underlying stock in the same account. 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), leaving 50 shares uncovered.

Third, you need Fidelity Active Trader Pro installed and updated. The platform is a free download for Fidelity brokerage customers. Make sure you are running the latest version so the options chain layout matches the steps below.

Step-by-Step: Placing the Trade in Active Trader Pro

Follow these steps in order. We will use a real example: you own 100 shares of AAPL, currently trading at $213.50, and you want to sell one out-of-the-money covered call expiring in about 30 days.

**Step 1 — Open the Options Chain.** In Active Trader Pro, type AAPL in the symbol box at the top and press Enter. Click the 'Options' tab below the quote bar. The options chain will load showing calls on the left and puts on the right, organized by expiration date.

**Step 2 — Select Your Expiration Date.** Click the expiration date dropdown. For a standard monthly cycle, choose the expiration roughly 25–35 days out. For this example, select the expiration 30 days away. The chain will refresh to show strikes for that date.

**Step 3 — Choose Your Strike Price.** Scroll to the call side. You want a strike above the current stock price (out-of-the-money) to give yourself some upside room before the stock gets called away. For AAPL at $213.50, the $220 strike is about 3% out-of-the-money. Look at the Bid column for the $220 call — let's say it shows $2.85.

**Step 4 — Right-Click the Bid and Select 'Sell to Open.'** Right-click directly on the $2.85 bid price. A context menu appears. Select 'Sell to Open.' Active Trader Pro will auto-populate a trade ticket: Action = Sell to Open, Symbol = AAPL 220 Call, Quantity = 1, Order Type = Limit.

**Step 5 — Set Your Limit Price.** Do not use a market order for options. The bid-ask spread on options can be wide, and a market order may fill at a worse price than you expect. The Options Industry Council (OIC) recommends using limit orders for retail options traders. Set your limit at or near the midpoint between the bid ($2.85) and the ask (say $3.00). Try $2.92 as your limit price.

**Step 6 — Review the Order Details.** Before clicking Send, confirm: Action = Sell to Open, Expiration = your chosen date, Strike = $220, Contracts = 1, Limit Price = $2.92, Account = the account holding your AAPL shares. The estimated premium credit should show approximately $292 (1 contract × 100 shares × $2.92).

**Step 7 — Submit and Monitor.** Click 'Place Order.' Your order goes to the market as a limit order. If the stock is active, it will likely fill within seconds to a few minutes. Once filled, the $292 premium (minus commissions) is credited to your account immediately. You can monitor the position under Positions > Options.

Understanding the Numbers on Your Trade

Let's make sure the math is clear on the AAPL example.

You paid roughly $213.50 per share for 100 shares, so your cost basis is $21,350. You collected $292 in premium. That $292 is yours to keep no matter what happens next.

Scenario A — AAPL stays below $220 at expiration. The call expires worthless. You keep your 100 shares and the full $292. Your effective cost basis drops to $21,058 ($21,350 minus $292). You can sell another call next month.

Scenario B — AAPL closes above $220 at expiration. Your shares get called away (assigned) at $220. You receive $22,000 for the shares plus the $292 premium already in your account, for a total of $22,292. That is a gain of $942 over your $21,350 cost basis, or about 4.4% in 30 days. The tradeoff: if AAPL shoots to $235, you miss the gains above $220.

Scenario C — AAPL drops sharply. The call expires worthless and you keep the $292, but your shares are now worth less. The premium provides only partial downside protection — in this case, just $2.92 per share. The covered call does not protect you from a large drop in the stock price. This is the most important risk to understand.

The delta of the $220 call in this example is roughly 0.30, meaning the option price moves about $0.30 for every $1 move in AAPL. A delta near 0.30 is a common starting point for covered call writers who want a balance between premium income and the chance to keep their shares.

Risks You Should Not Skip Over

Covered calls are one of the most conservative options strategies, but they carry real risks that deserve honest attention.

**Capped upside.** Once you sell the call, your profit on the stock is capped at the strike price. If AAPL jumps 15% before expiration, you still sell at $220. You give up that extra gain in exchange for the premium you collected upfront.

**Assignment risk.** If AAPL closes above $220 on expiration day, Fidelity will automatically sell your shares at $220. This can trigger a taxable event. The IRS treats the sale of shares through assignment as a capital gain or loss in the year the assignment occurs. If you have held the shares less than one year, the gain is short-term. Consult a tax professional for your specific situation. Canadian investors should note that the CRA has its own rules for options premiums and adjusted cost base — the treatment differs from IRS rules.

**Early assignment.** American-style options (which most US equity options are) can be assigned before expiration. This is rare for out-of-the-money calls, but it can happen around ex-dividend dates. If AAPL has a dividend coming, check the ex-dividend date before selling the call.

**Stock risk is unchanged.** The covered call does not protect you if the stock falls hard. You still own 100 shares of AAPL. If the company reports bad earnings and the stock drops $30, you lose roughly $3,000 on the shares. The $292 premium offsets only a small portion of that loss.

**Liquidity risk.** Stick to liquid options with tight bid-ask spreads. AAPL, MSFT, NVDA, and SPY all have highly liquid options markets. Thinly traded stocks can have spreads of $0.50 or more, which eats into your premium. FINRA and the SEC both publish investor education materials on the importance of understanding liquidity before trading options.

How to Close or Roll the Position Before Expiration

You do not have to wait until expiration. If the trade moves in your favor early — say the call you sold for $2.92 is now worth $0.50 because AAPL pulled back — you can buy it back for $0.50 and lock in most of your profit. This is called 'buying to close.'

To close in Active Trader Pro: go to Positions > Options, right-click your short call position, and select 'Buy to Close.' Enter a limit order near the current ask price. Once filled, the obligation is gone and your shares are free again.

Rolling means closing the current call and simultaneously selling a new one at a later expiration or different strike. Active Trader Pro supports multi-leg orders. Right-click the position and look for 'Roll' in the context menu. The platform will pre-populate a spread order: buy to close the current call and sell to open the new one. You want to collect a net credit when rolling — meaning the new call you sell brings in more premium than it costs to close the old one.

A common rule of thumb: consider closing early when the call has lost 50–80% of its value. At that point, you have captured most of the premium and can redeploy capital into a new position with more time value remaining.

Quick Checklist Before Every Covered Call Trade

Use this checklist each time you sell a covered call on Fidelity Active Trader Pro.

1. Do I own at least 100 shares of this stock in this account? Yes / No 2. Is my options approval level at Level 1 or higher? Yes / No 3. Have I checked the earnings calendar? An earnings report before expiration can cause a large move in either direction. 4. Have I checked the ex-dividend date? Early assignment risk rises near dividends. 5. Is the bid-ask spread on the option reasonably tight (under $0.20 for liquid names)? Yes / No 6. Am I using a limit order, not a market order? Yes / No 7. Do I understand and accept that my upside is capped at the strike price? Yes / No 8. Have I noted the tax implications of a potential assignment this year? Yes / No

Running through this list takes 60 seconds and prevents the most common mistakes new covered call writers make.

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

Fidelity requires Level 1 options approval to sell covered calls, which is the entry-level tier. You apply through the Accounts & Trade section of Fidelity.com, and approval typically takes one to two business days. FINRA rules require Fidelity to verify your investment experience and financial situation before granting access.

Can I sell a covered call on Fidelity if my shares are in a retirement account like an IRA?

Yes, Fidelity allows covered calls in IRAs, but you must apply for options approval specifically for that IRA account — approval in your taxable account does not carry over automatically. The IRS permits covered call writing in IRAs, though the tax treatment differs from taxable accounts since gains inside an IRA are tax-deferred or tax-free depending on the account type. Check with a tax advisor for your specific situation.

What happens if I forget to close my covered call and it expires in the money?

If your covered call expires in the money, Fidelity will automatically exercise the option and sell your 100 shares at the strike price — this is called assignment. You keep the premium you collected, and the proceeds from the share sale are credited to your account. This is a taxable event, so the IRS will treat it as a sale of the underlying shares in that tax year.

How do I pick the right strike price when selling a covered call?

Most retail covered call writers start with an out-of-the-money strike that is 3–7% above the current stock price, which corresponds to a delta of roughly 0.20–0.35. A higher strike gives you more room for the stock to rise before assignment but pays less premium. A lower strike pays more premium but increases the chance your shares get called away. The Options Industry Council (OIC) offers free educational tools to help you model different strike and expiration combinations.

Why did my covered call order not fill right away on Active Trader Pro?

Limit orders are not guaranteed to fill immediately — your order sits in the market until a buyer is willing to pay your limit price. If the market moves away from your limit, try adjusting the price one or two cents toward the bid. Avoid lowering your limit too aggressively; patience usually results in a better fill than chasing the market.

Does selling a covered call affect the holding period of my shares for tax purposes?

It can. The IRS has rules under Section 1092 that may suspend the holding period of your shares if the covered call is considered 'in the money' at the time you sell it. Out-of-the-money covered calls generally do not affect the holding period, but deep in-the-money calls might. Consult a qualified tax professional or review IRS Publication 550 to understand how this applies to your specific trades.