Writing covered call option

How to write covered call option in kite?


You can write a covered call on Kite. To place a covered call, you just need to place orders to sell a call option and buy an equal quantity of shares of the same company. If you already hold shares of a F&O stock, you just have to sell the call option (above LTP) of equal value. You need to maintain sufficient margins required in order to write the call option.

If you’re learning to trading options you can also check out Sensibull. Sensibull lets you chose from among the best Option strategies for your market view and has useful tools like Option chain, Option Greeks, Events calendar etc. They are introducing a feature soon, where you can place a Covered call when appropriate, easily on their platform.

Hi Kshiteesh

thanks for answering, can you please also answer on below

so if the covered call option has to be excercised ( if the price of stock becomes more than my strike price) then will the stock be automatically debited from my account thus settling the trade? i ask this beacuse on NSE i heard it is cash settlement only …thank you

Physical/delivery based settlement is presently not applicable on all F&O stocks, its presently applicable to these 50 stocks.

So, if you’ve written a covered call in any of these scrips, you will have delivery obligation if the option goes in the money.

You can check out this support article to know our policy on physical settlement.

So when we say delivery obligation , does that mean that as soon as the strike price is reached before expiry, the position is automatically converted and the underlying stock is sold @ strike price - before expiry. Is that correct assumption ?

No. You’ll be obliged to give or take delivery of underlying shares only if your Strike Price expires ITM, there will be no physical delivery obligation before expiry.

So will it be fair to say, that no AUTOMATIC conversion action happens before expiry.
and on expiry - is it COMPULSORY that all ITM options will be converted.
Also if the option(the one that i sold(call writing) for my covered call) is ITM (reached strike price)…will I get to keep the premium that I had collected - irrespective of stock position conversion.

What is pledging the underlying shares…what if I have not pledged the underlying shares…

Or to keep it plain and simple…for Covered Calls @ Zerodha…if I BUY-WRITE and the strike price is reached - then the conversion is automatic and mandatory and I collet the premium as well as the profit from selling the underlying @ strike price.Is this accurate statement.

also at expiry - if the strike price is reached …the ITM call option will have a price higher than what i sold it for…???Isn’t that going to result in loss for me or Am i missing out on something here ?

As options approach expiry, time value is lost. ITM options that get exercised expire at 0 value. And you will have to give delivery at strike price, which settles that. So with covered call, you cap your profits.