Last updated on July 19th, 2022 at 09:54 pm
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With every call and put option, there needs to be a buyer and a seller. If you are the seller, you want to sell your options as fast as possible so you can hopefully make money off of them.
But how long does it take to sell a call or put option?
Call/Put options will sell immediately if you set a market order. If you set a limit order then they will sell as soon as someone is willing to pay that limit price that you set.
Essentially call and put options will sell as soon as there is a buyer. If you already own the option and are wanting to sell it then this will be pretty fast as long as you don’t set a limit price far above what the option is currently selling for.
Personally I always set my limit buys halfway between the bid and ask and will get most options sold in a couple of minutes.
If you are the original option seller (selling a covered call or put) you need to strategically choose the strike price, premium, and expiration date such that the option sells as fast as possible, but also such that you are not putting yourself at too high a risk of losing money on the option.
In this article I will explain how you can sell an option and why you might want to sell a call or a put. Then, there are resources you can utilize to learn more about selling options.
Call/Put Options Will Sell As Soon as There Is a Buyer
When you write an option (meaning you are the original seller of the option), you need to determine a few factors.
If you write it properly, you can sell it almost immediately without having too high of a risk of it being exercised and you facing a loss (execution times can vary with brokers, but it can take as little as seconds).
Options have three main factors:
- Strike price – The strike price is when the buyer can exercise the option if the stock price reaches it before the option expires (on the expiration date).
- Expiration date – This is when the option expires.
- Premium. The premium is the price you are selling the option for and the amount of your profit if the option is not exercised before the expiration.
If your premium is too low relative to the strike price, your option will sell relatively quickly, but there is a higher chance of exercising the option. If the strike price is far away from the stock’s current price with a close expiration date, a high premium, or both, it will be difficult to sell your option.
Once you have an option ready to sell, you will need to go through your brokerage account and put it on the market. As soon as there is a buyer, the option will sell, although some brokerages have a waiting period before the sale is officially closed.
Selling a Call/Put Option
When you sell call and put options, you think the price of a stock or other asset will change shortly. Contrarily, someone else will buy an option because they think the stock price is going to do the opposite of the seller.
You sell call and put options in different situations depending on whether you think a stock’s price will increase, decrease, or stay the same before the option expires.
When to Sell Call Options
When you sell a call option, you think the price of a stock will stay about the same or decrease. If you sell a call option, you set the strike price to a price that you are not expecting the stock to reach but would be willing to sell if the stock did increase to or above that strike.
With call options, the buyer is expecting the stock price to rise, so they want to have the option to buy at a lower price. If the stock price increases above the strike price of your option, the buyer will exercise the option, and you will have to sell the stock.
It may be tempting to sell your call option at a high strike price, so its chances of being exercised are lower. However, you will need to sell the option at a much lower premium if you want the option to sell.
You can also sell a call option at a lower strike price but at a higher premium or with a closer expiration date. While it may cost you your stock, you will earn more money if the option is not exercised.
Either way, it is important to balance the premium of the option with the strike price and the expiration date if you want to sell the call option in a short amount of time.
When to Sell Put Options
Selling put options is the opposite of selling call options. You will sell a put option if you think the price will stay about the same or increase.
The put option buyer is expecting the stock’s price to go down, and they want to be able to sell the stock at a specific price. If the stock price falls below the strike price and the buyer exercises the option, you will have to buy their stock at the strike price.
Like selling call options, you want to sell put options with a realistic strike price and premium. Otherwise, it will be hard to sell them.
If your strike price is significantly lower than the stock’s current trading price, you should sell the option at a low premium, so someone is willing to buy it. However, if the strike price is close to the current trading price, you can sell the put at a higher premium to offset the higher risk you face.
Learn More About Selling Options
If you want to learn more about selling options, you can check out the resources in this section.
First, this video from TastyTrade on YouTube will explain the basics of selling (writing) options:
Another video is this one from Option Alpha which explains the difference between buying and selling options:
Furthermore, the book The No Nonsense Guide to Buying and Selling Options will help you understand when you should be selling options and whether or not you should buy some options to supplement your sales.
Finally, you can read How You Can Sell Options For a Living. You will learn a seven-step process for profiting from selling options.
If you are selling lucrative options, they will sell very quickly. You need to make sure that the strike price, expiration date, and premium are all in line such that you do not sell an option with too high of a risk, but also do not try to sell an option that no one is interested in.