How to Set Up a Covered Call Scan in Thinkorswim on Schwab (Step-by-Step)

The Short Answer: Where to Start in Thinkorswim

To set up a covered call scan in Thinkorswim on Schwab, open the platform, click the Scan tab at the top, then select Stock Hacker. From there you add a series of filters — stock price, option volume, implied volatility, and delta — that narrow a universe of thousands of tickers down to a short list of covered-call candidates worth reviewing. The whole setup takes about ten minutes the first time, and you can save it as a custom scan to reuse every week.

Thinkorswim is now fully integrated into Charles Schwab's platform after the TD Ameritrade acquisition completed in 2023. If you already have a Schwab brokerage account, you can download Thinkorswim for desktop or use the web version at no extra cost. The Options Industry Council (OIC) notes that covered calls are one of the most beginner-friendly options strategies, and having a repeatable scan process is the single biggest time-saver for income-focused traders.

What Makes a Good Covered Call Candidate?

Before you touch the scan tool, you need to know what you are looking for. A covered call works best on a stock you already own — or are willing to own — that is liquid, has active options, and is priced so the premium you collect is worth the trade-off of capping your upside.

Here are the four criteria that matter most:

1. Stock price above $20. Cheaper stocks tend to have wide bid-ask spreads on their options, which eats into your premium. 2. Option open interest above 500 on the specific strike you plan to sell. Low open interest means poor fills. 3. Implied volatility rank (IVR) above 30. IVR compares current implied volatility to the past 52 weeks. Higher IVR means fatter premiums. Thinkorswim calculates IVR natively. 4. Delta on the call you sell between 0.20 and 0.35. This range gives you a reasonable premium while keeping a roughly 65–80% probability the option expires worthless and you keep the full credit. FINRA reminds retail traders that selling calls with very high delta (above 0.50) significantly increases the chance of assignment and losing the stock position at the strike price.

Building the Scan Step by Step

Follow these steps exactly in the Thinkorswim desktop app. The web version has the same layout.

Step 1 — Open Stock Hacker. Click the Scan tab in the top navigation bar, then choose Stock Hacker from the sub-menu.

Step 2 — Set your stock filters. Click Add filter > Stock > Last. Set it to 'is greater than' 20. This removes penny stocks. Add a second stock filter: Stock > Volume. Set it to 'is greater than' 500,000. This keeps you in liquid names.

Step 3 — Add an options filter for open interest. Click Add filter > Options > Open Interest. Set it to 'is greater than' 500. Thinkorswim will look at the option chain for each stock and flag those with sufficient liquidity.

Step 4 — Add an implied volatility filter. Click Add filter > Options > Implied Volatility. Set it to 'is greater than' 25 (percent). This is a rough proxy for IVR if you want a simpler setup. For a more precise filter, use the Study filter and search for 'ImpVolatility' to add the platform's built-in IV study.

Step 5 — Restrict to optionable stocks. Click Add filter > Stock > Options > Is Optionable. Set to True.

Step 6 — Run the scan and sort results. Click Scan. You will typically get 200–600 results. Sort the output column by Implied Volatility descending to push the highest-premium candidates to the top.

Step 7 — Save the scan. Click the floppy-disk icon (Save Scan Query) and name it something like 'CC Weekly Candidates.' It will appear in your personal scan library every time you open Thinkorswim.

Worked Example: Scanning Into an AAPL Covered Call

Say your scan runs on a Tuesday morning and AAPL appears near the top. The stock is trading at $213.40. You already own 100 shares. Here is how you evaluate the trade directly inside Thinkorswim.

Click on AAPL in the scan results to open the option chain. Navigate to the expiration 21 days out (the standard monthly cycle). Look at the calls with a delta between 0.20 and 0.35. You find the $220 strike call expiring in 21 days showing: - Bid: $1.85 / Ask: $1.92 - Delta: 0.28 - Open interest: 14,200 - Implied volatility: 31%

You sell one contract (100 shares) at the $1.85 bid to be conservative. Your gross premium collected is $185. Your maximum gain on the stock is capped at $220 — meaning if AAPL runs to $230 before expiration, you still sell at $220 and miss the extra $10 per share ($1,000). Your breakeven on the downside is $213.40 minus $1.85 = $211.55. If AAPL closes below $211.55 at expiration, you are in a net loss on the combined position.

Annualized yield on this trade: ($1.85 / $213.40) × (365 / 21) = approximately 15.1%. That is a rough figure — actual returns depend on assignment, early exercise, and taxes.

On the tax side, the IRS treats premiums received from selling covered calls as short-term capital gains in the year the position closes, not when you collect the premium. If you are a Canadian investor using a similar platform, the CRA applies analogous treatment — option premiums are generally income or capital depending on your trading frequency and intent. Consult a tax professional for your specific situation.

Risks You Need to Understand Before You Scan

Covered calls are not a free lunch. Here are the real risks, stated plainly.

Capped upside is a real cost. If you sell the $220 AAPL call and the stock jumps to $240 on an earnings beat, you sell at $220. You collected $185 in premium but gave up $2,000 in gains. Over a long bull run, repeatedly capping your upside can meaningfully reduce total return compared to simply holding the stock.

You can still lose money on the stock. The premium you collect only offsets a small drop. A 10% decline in AAPL from $213.40 takes the stock to $192. Your $1.85 premium reduces that loss slightly, but you still have a significant unrealized loss on the shares.

Early assignment is possible. The SEC notes that American-style equity options — which is what you trade on individual stocks like AAPL — can be exercised by the buyer at any time before expiration. If AAPL goes deep in-the-money before expiration, the call buyer may exercise early, and your shares get called away. This can trigger an unexpected taxable event.

Bid-ask spread friction. If the spread on your option is $0.15 wide and you are collecting $1.85, you are giving up about 8% of your premium to the market maker just on the entry. Always use limit orders near the bid when selling, not market orders. FINRA recommends retail options traders understand order types before placing trades.

Do not scan for the highest premium blindly. Extremely high implied volatility often signals a binary event — earnings, FDA ruling, merger vote — where the stock can move violently in either direction. A $5.00 premium on a $50 stock sounds great until the stock drops $15.

Refining Your Scan Over Time

Once you have the basic scan running, you can layer in more precision. Here are three upgrades worth adding after your first few weeks.

Filter by earnings date. Thinkorswim has an 'Earnings' filter under the Stock category. Set it to 'is not within 14 days' to avoid accidentally selling a covered call into an earnings announcement. Earnings events cause implied volatility to collapse after the report (called IV crush), which can work for or against you depending on timing.

Add a price-to-52-week-high filter. Under Stock > High 52 Week, set a filter so the stock is trading within 85% of its 52-week high. This keeps you in stocks with relative strength rather than stocks that are in a prolonged downtrend — a downtrending stock is a poor covered-call candidate because the premium rarely compensates for the ongoing capital loss.

Sort by premium-to-stock-price ratio. In the scan results, right-click the column header and add a custom column for option bid price divided by stock last price. Sorting by this ratio descending shows you which stocks offer the most premium per dollar of stock owned. Aim for a ratio above 0.008 (0.8%) for a 21-day trade to make the effort worthwhile after commissions.

Schwab charges $0.65 per options contract as of this writing. On a single covered call, that is $0.65 to open and $0.65 to close — $1.30 total. On a $185 premium, commissions are less than 1% of the trade. On a $30 premium, they are over 4%. Keep this in mind when scanning for lower-priced stocks.

Saving and Scheduling Your Weekly Scan Routine

The traders who get the most out of covered call scanning treat it like a repeatable process, not a one-time setup. A practical weekly routine looks like this:

Monday morning (15 minutes): Run your saved scan. Export the top 20 results to a watchlist inside Thinkorswim by right-clicking the scan results and selecting 'Send to Watchlist.' Name the watchlist 'CC Review — Week of [date].'

Monday midday: Open each watchlist name, check the option chain for your target expiration, and note the best strike and premium. Cross-reference with your existing holdings — you can only sell covered calls on stocks you own at least 100 shares of.

Tuesday or Wednesday: Place your trades using limit orders. Avoid placing trades in the first 15 minutes after market open when spreads are widest.

Expiration week: Review open positions. If the stock has moved well below the strike and the option is worth less than $0.10, consider buying it back early to free up the position. Thinkorswim's position monitor tab shows your open covered calls alongside the current option value in real time.

The OIC offers free educational resources on covered call management, including rolling strategies, that pair well with the scanning workflow described here.

Can I run a covered call scan on the Thinkorswim web version or only the desktop app?

The Stock Hacker scan tool is available on both the Thinkorswim desktop app and the web-based version at Schwab.com. The desktop version has slightly more filter options and runs faster on large scans. Either version will work for the basic covered call scan described in this article.

What delta should I use when scanning for covered calls?

Most income-focused covered call sellers target a delta between 0.20 and 0.35 on the call they sell. A delta of 0.30 means the option has roughly a 30% chance of expiring in-the-money based on current pricing. Lower delta means less premium but a higher probability of keeping the full credit.

How do I avoid selling a covered call right before an earnings announcement?

In Thinkorswim's Stock Hacker, add a filter under Stock > Earnings and set it to exclude stocks with earnings within the next 14 days. You can also check the earnings date manually on the stock's quote page before placing any trade. Selling into earnings can result in large, fast moves that overwhelm the premium you collected.

Does Schwab charge extra fees to use Thinkorswim for options scanning?

No. Thinkorswim is included free with any Schwab brokerage account. Schwab charges $0.65 per options contract for trades, but there is no separate platform or data fee for using the scan tools. Paper trading mode is also free if you want to practice before using real money.

What happens to my covered call if the stock gets called away before expiration?

Early assignment means the call buyer exercised their right to buy your shares at the strike price before the expiration date. Your shares are sold at the strike, you keep the premium you collected, and the position closes. The IRS treats the proceeds as a stock sale, so the gain or loss on the shares is a taxable event — consult a tax advisor for your specific situation.

How many results should a good covered call scan return?

A well-calibrated scan typically returns between 50 and 300 results depending on your filters. If you get fewer than 20, your filters are too tight — try loosening the implied volatility or open interest thresholds. If you get over 500, add a stricter filter such as a minimum stock price of $30 or a minimum option volume of 1,000 to make the list manageable.