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Selling Covered Calls on QT TFSA

  • Last Updated:
  • Feb 11th, 2021 6:14 pm
[OP]
Jr. Member
Aug 17, 2008
115 posts
20 upvotes

Selling Covered Calls on QT TFSA

Hi Everyone,

It's my first time writing a call in my TFSA when I usually just buy calls/puts and sell them prior to expiry.

Just want to make sure I'm understanding this correctly. I'm an accountant by trade so I understand the principle of calls and puts, but just wanted to know if I'm doing it right on Questrade.

I have 500 stock of company A (priced at $20) in my QT TFSA where I want to collect some premium. The company is on the TSX so there is no covered call option in QT.

I sold 5 call contracts where questrade indicated that I am entering a short position and collected $750 in premiums. Now my questrade has my call contract I sold with -5 in it as quantity.

Since it's at -5, do I have to cover those call contracts before expiry or can I just let it expire if its OTM? Regardless, if the price goes above my strike that I sold my call for, I am happy to sell it at that amount (losing out on potential upside in favour of the premium)
5 replies
Member
May 2, 2019
429 posts
487 upvotes
Vancouver
7773737 wrote: Since it's at -5, do I have to cover those call contracts before expiry or can I just let it expire if its OTM?
It's totally fine to let them expire. Saves you the commission, for sure.
Deal Addict
Jul 5, 2008
1448 posts
1248 upvotes
It's showing correctly. You are short 5 contracts of that company/strike/opex and because it's in a TFSA it's also tied to the common (in a margin acct you could sell the underlying and be naked).

Check what QT charges for assignment. If it's ITM and you leave it to opex it might be cheaper to buy back the option and sell the stock which is the equivalent. If it expires worthless there should be no further charges.
[OP]
Jr. Member
Aug 17, 2008
115 posts
20 upvotes
Thanks everyone - the clarification was great. More than likely I'll just let it expire worthless.
Deal Addict
User avatar
Dec 16, 2015
2504 posts
2170 upvotes
Canada
Hope its not squeezed
To the moon
Jr. Member
Jan 5, 2015
160 posts
218 upvotes
Toronto, ON
Letting it expire is ok, but that last few days it's already pennies and you're not gaining much anymore. Dunno about QT but it might take awhile for them to get rid of the position from your TFSA after expiring so that's another few days of opportunity cost you pay. Make sure to check how much they charge you in case you do get assigned. Irrc, everyone charges a fee except InteractiveBroker. It's usually a hefty fee too (something like $25-$50) if you do get assigned on your calls.

Usually, you want to buy back the covered call once it's -50% so you can roll it over into another covered call and collect premiums more efficiently, but that might not be feasible with QT's commission fees.

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