Placing a Covered Call Trade 

Homework: How about using the Paper Trade account on the Portfolio tab to place a covered call trade? This will involve two separate trades, first to buy a stock and second to sell a call options to open the second part of the trade.

1) Click on the "Portfolio" tab of the website

2) Click on the "Paper Trade" link on the left hand side of the page.

3) Click on the "Trade" button on the top of the page and fill in the info for the stock you would like to buy and click on "Review Order"

4) If the info is correct, click on "Place Order"

You have now completed the first part of the covered call trade. Once you have a confirmation that you own the stock you can place the second part of the trade.

1) Click on the "Trade" button and then on the "Options" link.

2) Click on "Sell to Open" - You are going to sell an option and open up a new option position.

3) Number of contracts should be 1/100 of the number of stocks you bought.

4) Fill in the stock symbol, the expiration month and the strike price you want to sell. You choose the expiration month and strike price.

5) You can now choose a market or limit price to sell the option for. I prefer to use a limit order for the current bid price of the option you are trying to sell, the February $40.00 call.

6) When you have the fields filled in click on "Review Order". If this is correct click on "Place Trade".

You have now placed a covered call trade.

1/23/05