Hey there! Ever found yourself wondering how to navigate the slightly intricate world of options trading, specifically when it comes to closing out a call option on E*TRADE? You're not alone! Many traders, from beginners to those with a bit more experience, can benefit from a clear, step-by-step guide.
Before we dive in, let's get you thinking: What's your current comfort level with options trading? Are you a seasoned pro looking for a quick refresher on E*TRADE's interface, or are you just starting to dip your toes into the options pool? No matter where you stand, this guide is designed to make the process as straightforward as possible.
Ready to take control of your call options? Let's get started!
A Comprehensive Guide: How to Close a Call Option on E*TRADE
Closing a call option on E*TRADE is a crucial step in managing your options trades, whether you're looking to lock in profits, cut losses, or simply exit a position before expiration. This guide will walk you through the process, ensuring you understand each stage.
Step 1: Log In and Locate Your Options Position
The very first step, and perhaps the most obvious, is to access your E*TRADE account.
1.1 Accessing the E*TRADE Platform: Open your web browser or the E*TRADE mobile app.
If using the web browser: Go to the official E*TRADE website (etrade.com).
If using the mobile app: Launch the E*TRADE mobile app on your smartphone or tablet.
1.2 Logging In Securely: Enter your User ID and Password into the designated fields. Ensure you are on a secure connection and be wary of phishing attempts.
1.3 Navigating to Your Portfolio: Once logged in, you'll typically land on your dashboard or portfolio summary. Look for a section or tab that displays your "Accounts" or "Portfolio". This is where all your holdings, including options contracts, will be listed.
1.4 Identifying the Call Option to Close: Within your portfolio, locate the specific call option contract you wish to close. It will usually be listed under the symbol of the underlying stock, along with details like the expiration date, strike price, and the number of contracts you own. Take note of the symbol and the number of contracts you hold.
Step 2: Initiate the Trade to Close the Position
Now that you've found the option, it's time to tell E*TRADE you want to get out of it.
2.1 Selecting the Option for Action: On your portfolio page, there will typically be an option to "Trade," "Sell," or "Close" next to your options position. Click on this option. This action will usually take you to an order entry screen pre-populated with details about your selected option.
2.2 Choosing the "Sell to Close" Action: This is a critical step. When you initially bought the call option, you "bought to open" the position. To close it, you must perform a "Sell to Close" order.
On the order entry screen, look for a "Action" or "Type" dropdown menu. Select "Sell to Close". Do NOT select "Sell to Open", as this would open a new short position.
2.3 Specifying the Number of Contracts: The order entry screen will usually default to the total number of contracts you hold for that specific option.
If you wish to close all your contracts, ensure the quantity matches your total holdings.
If you only want to close a portion of your contracts (e.g., you own 10 contracts but only want to sell 5), manually adjust the "Quantity" field to the desired number.
Step 3: Define Your Order Type and Price
This is where you determine how your order will be executed and at what price. This step is crucial for managing your risk and maximizing your returns.
3.1 Understanding Order Types: E*TRADE offers various order types, each with its own characteristics:
Market Order: This order tells E*TRADE to sell your contracts immediately at the best available price in the market. While it guarantees execution, there's no price guarantee, and you might get a less favorable price than you anticipated, especially for thinly traded options. Use with caution, especially for volatile options.
Limit Order: This is generally the recommended order type for options. With a limit order, you specify the maximum price you are willing to sell your call option for. Your order will only be executed if the market price reaches your specified limit or better. This gives you control over the price you receive.
Stop Order: (Less common for simply closing a long call, but good to know) A stop order becomes a market order once a specified "stop price" is reached.
Stop-Limit Order: Similar to a stop order, but once the stop price is reached, it becomes a limit order instead of a market order.
3.2 Setting Your Price (For Limit Orders): If you chose a Limit Order (which is highly recommended):
Look at the current bid and ask prices for your option. The "bid" is the highest price a buyer is willing to pay, and the "ask" is the lowest price a seller is willing to accept.
You'll typically want to set your limit price somewhere between the bid and ask, or even slightly above the current bid if you want to get filled faster.
Enter your desired limit price in the "Limit Price" field.
3.3 Choosing the Time-in-Force: This determines how long your order remains active in the market:
Day: Your order will be active only until the end of the current trading day. If it's not filled, it will expire.
Good 'til Canceled (GTC): Your order will remain active for an extended period (typically 60 days on E*TRADE) or until it's filled or you cancel it manually. This is useful if you're not actively monitoring the market and want your order to remain open.
Step 4: Review and Confirm Your Order
Before hitting that final "Place Order" button, a thorough review is absolutely essential. Mistakes here can be costly.
4.1 The Order Confirmation Screen: E*TRADE will almost always present you with a "Review Order" or "Order Confirmation" screen. Read every detail carefully.
4.2 Verify Key Information: Check the following:
Action: Should be "Sell to Close."
Symbol: Ensure it's the correct underlying stock and option contract.
Expiration Date: Confirm it's the right expiration.
Strike Price: Double-check the strike price.
Quantity: Make sure you're selling the intended number of contracts.
Order Type: Confirm it's "Limit" or "Market" as desired.
Limit Price (if applicable): Verify your chosen price.
Time-in-Force: Ensure it's "Day" or "GTC" as intended.
Estimated Commission/Fees: Understand the costs associated with the trade.
4.3 Confirming the Trade: Once you are 100% certain all the details are correct, click the "Place Order" or "Confirm" button.
Step 5: Monitor Your Order and Confirm Execution
Your job isn't quite done after placing the order.
5.1 Checking Order Status: After placing the order, you'll be redirected to an "Order Status" or "Order History" page.
If you placed a Market Order: It should execute almost instantly (unless there's extremely low liquidity).
If you placed a Limit Order: The order status will likely show as "Open" or "Pending."
5.2 Monitoring for Execution: Keep an eye on the "Order Status" page. Once your limit price is met and a buyer is found, the order status will change to "Filled" or "Executed." You will also typically receive an email confirmation from E*TRADE.
5.3 Verifying Your Portfolio: After receiving confirmation of execution, navigate back to your "Portfolio". The call option you just closed should now be removed from your holdings (or the quantity reduced if you only closed a portion). Your cash balance will also reflect the proceeds from the sale, minus any commissions.
Pro Tips for Closing Call Options on E*TRADE:
Understand Bid-Ask Spread: For less liquid options, the difference between the bid and ask price (the spread) can be wide. Placing a limit order within this spread often requires patience.
Practice with a Paper Trading Account: If you're new to options, E*TRADE offers a paper trading account. Use it to practice closing options before risking real capital.
Be Aware of Expiration: As an option approaches expiration, its time value erodes rapidly. If you don't want to exercise or be assigned, close your position well before expiration.
Consider Market Hours: Options can only be traded during regular market hours (typically 9:30 AM to 4:00 PM ET).
Frequently Asked Questions (FAQs) about Closing Call Options on E*TRADE
Here are 10 common "How to" questions related to closing call options on E*TRADE, with quick answers:
How to check the status of my options order on E*TRADE?
You can check the status of your options order by navigating to the "Order Status" or "Order History" section within your E*TRADE account, usually found under a "Trade" or "Accounts" tab.
How to cancel an open options order on E*TRADE?
To cancel an open options order, go to the "Order Status" section, locate the open order, and click on the "Cancel" button associated with that specific order.
How to modify an existing limit order for a call option on E*TRADE?
You can modify an existing limit order by going to the "Order Status" page, finding your open order, and selecting the "Modify" or "Edit" option. From there, you can typically adjust the limit price or quantity.
How to know if my call option has been successfully closed on E*TRADE?
You will know your call option has been successfully closed when its status changes to "Filled" or "Executed" on the "Order Status" page, and it no longer appears in your active holdings within your portfolio. E*TRADE also typically sends an email confirmation.
How to calculate the profit or loss from closing a call option on E*TRADE?
To calculate profit or loss, subtract your original purchase price (plus commissions paid when opening) from the sale price (minus commissions paid when closing). E*TRADE's activity statements will also show your realized gains/losses.
How to avoid automatic exercise of a call option at expiration on E*TRADE?
To avoid automatic exercise, you must close your call option position before the expiration date and time (typically 5:00 PM ET on the Friday of expiration, though some brokers have earlier cutoffs). If your call option is in-the-money at expiration and you still hold it, E*TRADE will automatically exercise it.
How to close only a portion of my call option contracts on E*TRADE?
When initiating the "Sell to Close" order, simply adjust the "Quantity" field to the number of contracts you wish to sell, rather than the total number you hold.
How to set a good limit price when closing a call option on E*TRADE?
A good limit price is often set between the current bid and ask prices. If you want a quicker fill, you might set it closer to or at the current bid. If you have patience and want a better price, you can set it closer to the ask.
How to find the cost basis of my call option on E*TRADE?
Your cost basis for a call option can typically be found in your E*TRADE account's "Portfolio" details for that specific holding, or within your account statements under "Activity" or "Tax Info."
How to get help from E*TRADE if I encounter issues closing my call option?
If you encounter any issues, you can contact E*TRADE's customer support via phone, live chat, or secure message, usually found under the "Help" or "Contact Us" sections on their website or app.
