Besides the theory of the covered call, how does it actually work with the broker?

Senario, suppose I own 100 shares of the stock, now I am going to sell 1 call option on the stock for the purpose of doing a covered call.

If the broker does not know or see that I already own the stock, they will require some cash margin. Do I have to contact broker and tell them that I already own the stock and the call purpose is to create a covered call? Or do they look and figure this out themself?

And what happens if the call is assigned? Does the broker automatically sell the stock, or do they contact me, or do they pull money from the account without seeing that the stock is there?

1 Answer 1


All of this is computerized and happens automatically. On the most basic level, it checks to see if you have option trading approval, if you have the appropriate level of approval for the option transaction that you are attempting to execute as well as sufficient margin available if any is required.

On the back end, it's all automated. If you are assigned, they sell your stock.

All you have to do is make wise trading decisions and execute the trades properly. Other than that, it's like Greyhound: "Leave the driving to us."

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