Mastering covered calls can be a fantastic way to generate income from your existing stock holdings. But what happens when the market moves against you, or you simply want to adjust your position? Knowing how to properly close a covered call on Webull is crucial. This comprehensive guide will walk you through the entire process, step-by-step, ensuring you feel confident and in control of your options trades.
Are you ready to take control of your covered call positions and optimize your trading strategy on Webull? Let's dive in!
Understanding Why You'd Close a Covered Call
Before we jump into the "how," let's briefly touch upon why you might want to close a covered call. It's not always about preventing a loss; sometimes it's about optimizing your gains or managing your risk.
Profit Taking: If the premium you collected has significantly decayed and the stock price has stayed relatively flat or declined, you might want to buy back the call option for less than you sold it for, locking in your profit.
Avoiding Assignment: If the stock price rises significantly above your strike price and you don't want your shares to be called away (assigned), you'll need to close the covered call.
Rolling the Option: You might close an existing covered call to immediately open a new one with a different strike price or expiration date, perhaps to capture more premium or give the stock more room to run.
Changing Market Outlook: If your outlook on the underlying stock changes (e.g., you become more bullish), you might want to close the covered call to participate in further upside without the cap.
Freeing Up Shares: If you need to sell your underlying shares for any reason, you'll first need to close the covered call.
Now that we understand the motivations, let's get to the practical steps on Webull.
Step 1: Access Your Options Positions
The first step to closing your covered call on Webull is to locate the position within your account.
Sub-heading: Navigating to Your Portfolio
To begin, open the Webull app on your mobile device or log in to the desktop platform.
Mobile App: Tap on the Webull logo at the bottom center of your screen. This will typically take you to your main account overview.
Desktop Platform: Navigate to the "Account" or "Positions" tab, usually found on the left-hand side or top menu.
Sub-heading: Locating Your Covered Call
Once you're in your account, you'll need to find your specific covered call position.
Mobile App: Within the "Assets" or "Positions" tab, look for the section dedicated to Options. You should see a list of your open option contracts. Your covered call will be listed as a "Short Call" position, often with the underlying stock showing as a "Long Stock" position directly beneath it or linked to it.
Desktop Platform: In the "Positions" widget, expand the options section. You'll see your short call contract. It's important to identify the correct contract by its underlying symbol, strike price, and expiration date.
Pro Tip: Webull visually links covered calls to their underlying shares, making it easier to identify them. Double-check the contract details to ensure you're selecting the right one.
Step 2: Initiate the Closing Order
Once you've identified the covered call you wish to close, it's time to initiate the closing order.
Sub-heading: Selecting the Contract
Mobile App: Tap directly on the short call option contract you want to close. This will open up the details page for that specific option.
Desktop Platform: Right-click on the short call option contract or select it and look for an "Action" or "Trade" button.
Sub-heading: Choosing "Close Position"
On the option details page:
Mobile App: Look for a button or option that says "Close Position" or similar. Sometimes it might be under a "More Actions" (three dots) menu. Tap on it.
Desktop Platform: There will typically be a clear "Close Position" button or an option to "Buy to Close" in the order entry window that pops up.
Important Note: Since you initially sold the covered call (short call), to close it, you will need to buy back the same option contract. Webull's "Close Position" function will automatically set this as a "Buy to Close" order.
Step 3: Configure Your Order Parameters
Now you'll define the specifics of your closing order. This is where you decide how you want to execute the trade.
Sub-heading: Order Type Selection
Webull offers various order types. For closing options, the most common are:
Limit Order (Recommended): This allows you to set a specific price at which you want to buy back the option. Your order will only be filled if the market price reaches your desired price or better. This gives you control over the execution price. For example, if you sold a call for $1.00 and it's now trading at $0.20, you might place a limit order to buy it back at $0.15 to maximize your profit.
Market Order: This order instructs Webull to execute your trade immediately at the best available market price. While it guarantees execution, you don't have control over the price, which can be disadvantageous in fast-moving markets due to potential slippage. Generally, avoid market orders for options unless immediate execution is paramount and you're comfortable with potential price fluctuations.
To select your preferred order type:
On the order entry screen, look for the "Order Type" field and choose "Limit" or "Market."
Sub-heading: Setting the Price (for Limit Orders)
If you selected a Limit Order:
You'll see a field to enter your desired "Limit Price." This is the price per share (or per contract, effectively) that you're willing to pay to buy back the option.
Webull will often pre-populate this with the current bid or ask price. Adjust it to your desired level. Remember, you want to buy it back for less than you sold it for.
Sub-heading: Specifying Quantity
The "Quantity" field will likely default to the number of contracts you currently hold. Make sure this matches the number of covered call contracts you want to close. Each option contract represents 100 shares of the underlying stock.
Sub-heading: Choosing Time-in-Force (TIF)
This dictates how long your order will remain active if it's not immediately filled. Common options include:
Day (Default): The order is active only for the current trading day and will be canceled if not filled by market close.
Good 'Til Canceled (GTC): The order remains active until it is filled or you manually cancel it. This is useful if you're trying to hit a specific price point and are willing to wait.
Select your desired "Time-in-Force" from the dropdown menu.
Step 4: Review and Confirm Your Order
This is a critical step. Always review your order details before submitting.
Review everything:
Action: Should say "Buy to Close"
Underlying Symbol: Is it the correct stock?
Option Type: Call
Strike Price: Is it the correct strike?
Expiration Date: Is it the correct expiration?
Quantity: Is this the number of contracts you intend to close?
Order Type: Limit or Market?
Limit Price (if applicable): Is this the price you want?
Estimated Cost: Understand the total amount required to buy back the option.
Fees: Be aware of any associated fees.
Confirm: Once you're absolutely sure all details are correct, tap the "Buy" or "Confirm" button to submit your order.
Mistakes in options trading can be costly, so take your time during this review phase!
Step 5: Monitor Your Order and Position
After submitting your order, it's essential to monitor its status.
Sub-heading: Checking Order Status
Mobile App: Go to the "Orders" tab (usually found at the bottom of the screen).
Desktop Platform: Look for the "Orders" window or section.
You'll see if your order is:
Pending: Your order has been placed but not yet filled. This often happens with limit orders if the market hasn't reached your desired price.
Filled: Your order has been executed, and the covered call position is now closed.
Canceled: You or the system canceled the order.
Rejected: The order was rejected for some reason (e.g., insufficient funds, incorrect parameters).
Sub-heading: Verifying Closed Position
Once your order is filled, return to your "Positions" or "Assets" tab.
The short call option position should no longer appear in your open positions.
Your cash balance will reflect the cost of buying back the option.
Your underlying shares will still be in your account, now uncovered (no longer associated with the sold call).
Congratulations! You have successfully closed your covered call on Webull.
Important Considerations and Tips
Liquidity: For thinly traded options, it might be harder to get your limit order filled at your desired price. You may need to adjust your limit price closer to the market price.
Bid-Ask Spread: Be mindful of the bid-ask spread, especially for less liquid options. A wide spread means you might pay more to buy back the option than the mid-price suggests.
Time Decay: Covered calls benefit from time decay (theta). As the option approaches expiration, its value generally erodes, making it cheaper to buy back.
Volatility: Increased volatility can increase the option's premium, potentially making it more expensive to buy back. Conversely, decreasing volatility can make it cheaper.
Assignment Risk: If your covered call is in-the-money (stock price above strike price) as expiration approaches, there's a higher chance of early assignment. Closing the position before expiration eliminates this risk.
Rolling: If you want to "roll" your covered call (close the current one and open a new one), Webull may have a dedicated "Roll" function for multi-leg strategies, or you can execute it as two separate trades (buy to close, then sell to open).
Fees: While Webull offers commission-free options trading, regulatory and exchange fees still apply. These are usually small per contract. Always check the fee schedule.
By understanding these nuances and following the step-by-step guide, you can confidently manage and close your covered call positions on Webull, adapting your strategy to changing market conditions and optimizing your returns.
10 Related FAQ Questions
How to check my covered call profit/loss on Webull?
You can check your covered call's profit or loss directly from the "Positions" tab in your Webull account. Tap on the specific option contract, and its details page will usually show your unrealized P/L (profit/loss) for that position. Once closed, the realized P/L will be reflected in your account history.
How to avoid assignment on a covered call on Webull?
To avoid assignment on a covered call, you must close the short call option position before it expires in-the-money. This means buying back the call option. You can also "roll" the option by closing the current one and opening a new one with a higher strike price or a later expiration date, pushing off the potential assignment.
How to roll a covered call on Webull?
While Webull might have a specific "Roll" function for multi-leg strategies, you can manually roll a covered call by first executing a "Buy to Close" order for your existing short call, and then immediately placing a "Sell to Open" order for a new call option with your desired (typically higher) strike price and/or later expiration date.
How to know if my covered call is in-the-money (ITM) on Webull?
On Webull, when viewing your options positions, the status of your option (In-the-Money, At-the-Money, Out-of-the-Money) is usually indicated. For a call option, it is ITM if the current stock price is above the strike price.
How to set a "Do Not Exercise" (DNE) instruction for options on Webull?
Webull allows you to set a "Do Not Exercise" (DNE) instruction for long options, typically if you don't want them to be automatically exercised at expiration even if they are in-the-money. For short options like covered calls, the primary concern is assignment, which is managed by closing the position or allowing assignment if it's profitable. Webull will auto-exercise ITM options unless DNE is specified or you lack sufficient equity/shares.
How to view my options trading history on Webull?
Your options trading history on Webull can usually be found in the "Orders" or "History" section of your account. This will show all your executed trades, including buys and sells of options contracts.
How to determine the best time to close a covered call on Webull?
The best time to close a covered call depends on your strategy and market conditions. Consider closing:
When you've captured most of the premium (e.g., the option has decayed significantly).
If the stock price moves significantly against you and you want to avoid further losses on the underlying stock (though closing the call only stops further premium loss, not stock loss).
If the stock price is nearing or has surpassed your strike price and you want to avoid assignment or roll the option.
As expiration approaches and the option's time value is minimal.
How to calculate the maximum profit of a covered call on Webull?
The maximum profit of a covered call is limited to the premium received from selling the call option PLUS the difference between the strike price and your stock's purchase price (if the strike is higher). Maximum Profit = (Strike Price - Stock Purchase Price) + Premium Received This assumes the stock is called away at the strike price.
How to deal with early assignment on a covered call on Webull?
If your covered call is assigned early, your 100 shares of the underlying stock (per contract) will be sold at the strike price. Webull will typically notify you of the assignment. If you wanted to keep the shares, you would have needed to buy back the call option before assignment occurred.
How to find the fees associated with closing a covered call on Webull?
Webull generally has a transparent fee schedule accessible through their website or within the app's "Help Center" or "Pricing" section. While Webull advertises commission-free options trading, regulatory and exchange fees (like FINRA Trading Activity Fee, Options Regulatory Fee, and OCC Clearing Fee) still apply per contract, usually a few cents. You can also see an estimated fee breakdown before confirming your order.
