Sell Call Robinhood: How It Works & Risks

Selling a call option on Robinhood means you collect a premium now in exchange for the obligation to sell 100 shares of a stock at a set price by a set date. You can do this from the Options section of the app, but you must have approved options trading and, for most call sells, enough shares or cash to cover the position. This article explains the mechanics, the real risks, and what to check before you place the trade.

What Selling a Call Actually Does

When you sell a call, you open a short position in that option. The buyer pays you a premium, and you owe them the right to buy 100 shares from you at the strike price, any time before expiration. If the stock stays below the strike, the option expires worthless and you keep the premium. If the stock rises above the strike, the buyer will likely exercise, and you must deliver shares at the strike price—even if the market price is much higher.

On Robinhood, you’ll see this as “Sell to Open” in the trade ticket. Your account must have the required buying power or shares to support the obligation. For a covered call, you already own the shares. For a cash-secured put (which is a different trade), you set aside cash to buy shares if assigned. Selling a naked call—where you don’t own the shares—has unlimited risk and Robinhood generally restricts it to advanced accounts with high margins.

How to Place a Sell Call Order on Robinhood

1. Open the Robinhood app and tap the magnifying glass to search for the stock you want to trade.
2. Tap the stock, then tap Trade and choose Options.
3. Select the expiration date and the strike price you want to sell.
4. In the trade ticket, set the action to Sell to Open.
5. Enter the number of contracts (each contract = 100 shares).
6. Review the premium, the bid/ask spread, and the buying power effect, then tap Review and confirm.

If you don’t see Options in the app, you need to apply for options trading. Go to your profile → Investing → Options, and answer the questions. Robinhood will approve you for a level (1, 2, or 3) based on your experience and income. Level 1 usually allows covered calls and cash-secured puts; level 3 allows spreads and naked calls.

Covered Calls vs. Naked Calls

The most common way to sell a call is a covered call: you own 100 shares of the stock, and you sell one call contract against them. If the stock rises above the strike, your shares get called away, but you keep the premium and any profit up to the strike. If the stock falls, the premium offsets some of your loss, but you still own the depreciated shares.

A naked call means you don’t own the underlying shares. Your risk is theoretically unlimited because the stock can rise without bound. Robinhood requires a higher options level and margin account for this, and it will show a large “buying power effect” to cover potential losses. Most beginners should avoid naked calls.

What Happens at Expiration?

If the option is in the money (stock price above the strike) at expiration, Robinhood will likely exercise it automatically. If you sold a covered call, your shares will be sold at the strike price. If you sold a naked call, Robinhood will buy shares at market price to deliver, and you’ll take the loss. If the option is out of the money (stock below strike), it expires worthless and you keep the full premium.

You can also buy to close your position before expiration. This locks in your profit or loss. For example, if you sold a call for $2.00 and the premium drops to $0.50, you can buy it back for $50 and keep $150 profit. If the premium rises to $5.00, buying it back costs $500, so you lose $300.

Risks and Common Mistakes

• Assignment risk: You can be assigned at any time, not just at expiration, especially if the option is deep in the money and has little time value.
• Opportunity cost: If the stock rockets, you miss the upside beyond your strike price. Your max gain is the premium plus the difference between your purchase price and the strike.
• Downside risk: A covered call doesn’t protect you from a big drop. You lose on the shares, and the premium only cushions a small decline.
• Liquidity: Wide bid/ask spreads can eat into your premium. Check the spread before selling—if the bid is $1.90 and the ask is $2.10, you’ll likely fill near the bid.
• Margin calls: For naked calls, a sharp price spike can trigger a margin call and force you to close at a loss.

Costs and Fees

Robinhood charges $0 commission for options trades, but you still pay regulatory fees (like the SEC fee) on sells, which are tiny. The bigger cost is the bid-ask spread—you sell at the bid, which is lower than the mid-price. Also, if you get assigned, you may pay standard stock trading fees (also $0 at Robinhood). There are no contract fees, unlike some other brokers that charge $0.65 per contract.

Alternatives to Selling Calls

If you want income but don’t want the obligation, consider selling puts (you get premium but must buy shares if assigned) or buying dividend stocks instead. You could also use a bull put spread or bear call spread to limit risk, but those require level 3 approval. Another alternative is to simply hold the stock and set a limit sell order—you avoid option complexity but also lose the premium income.

Frequently Asked Questions

Do I need to own the stock to sell a call on Robinhood?

Not necessarily. You can sell a naked call if you have level 3 options approval and enough margin, but it’s risky. For covered calls, you must own at least 100 shares per contract.

What happens if I sell a call and the stock goes up?

You may be assigned and have to sell your shares at the strike price. Your profit is capped at the premium plus the difference between your cost basis and the strike. If you don’t own shares, you’ll have to buy them at market price to deliver, which can cause a large loss.

Can I close a sold call early?

Yes, you can buy to close the same option before expiration. This is common to lock in profits or cut losses. The cost is the current ask price of the option.

What is the max profit on a covered call?

Your max profit is the premium received plus the gain from your stock purchase price to the strike price. For example, if you buy at $50, sell a $55 call for $2, the max profit is $7 per share ($5 capital gain + $2 premium) minus any fees.

Does Robinhood auto-exercise options at expiration?

Yes, if the option is in the money by at least $0.01 at expiration, Robinhood will exercise it automatically. You can avoid this by closing the position before expiration.

Is selling calls a good strategy for beginners?

Covered calls can be a reasonable income strategy if you understand the risks and are comfortable holding the stock. But it’s not free money—you give up upside and still have downside risk. Start with a small position and paper trade first if you’re unsure.

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