How to Find and Sell Covered Calls on Charles Schwab and thinkorswim: A Step-by-Step Guide

The Short Answer: Where to Start on Schwab and thinkorswim

You can find and sell covered calls on Charles Schwab in two places: the standard Schwab.com web platform and the more powerful thinkorswim (ToS) desktop or mobile app, which Schwab acquired when it bought TD Ameritrade. On Schwab.com, go to Trade → Options to pull up a basic chain. On thinkorswim, open the Scan tab to screen hundreds of stocks at once, then route your order directly from the chain. Both platforms require that your account is approved for options trading at least Level 1 (covered calls), which you apply for under Account → Upgrade Features on Schwab.com. FINRA Rule 2360 requires brokers to verify that options strategies are suitable for each customer before granting access, so expect a short questionnaire about your experience and net worth.

What You Need Before You Place a Single Trade

Covered calls are not complicated, but three things must be true before you sell one.

First, you must own at least 100 shares of the underlying stock for every call contract you sell. One contract covers exactly 100 shares. If you own 250 shares of AAPL, you can sell at most two contracts without going naked on the third — and naked calls require a much higher options approval level.

Second, your account needs options Level 1 approval on Schwab. Log in, click your account name in the top-right corner, choose Profile → Upgrade Features → Apply for Options. The application asks about your trading experience, annual income, and liquid net worth. Most retail investors with a few years of stock experience are approved within one business day.

Third, understand the tax treatment before you trade. The IRS treats most covered-call premiums as short-term capital gains in the year you receive them, regardless of how long you have held the stock. More importantly, selling a deep in-the-money call can suspend the holding period on your shares under IRS Section 1092 qualified covered call rules, which could convert a long-term gain into a short-term gain if the stock is called away. Canadian investors should note that the CRA treats option premiums as income or capital depending on the frequency of trading and intent — consult a tax professional if you are unsure which treatment applies to you.

How to Use the thinkorswim Scan Tab to Find Covered-Call Candidates

The thinkorswim Scan tab is the fastest way to filter thousands of stocks down to a short list of covered-call candidates. Here is a repeatable workflow.

1. Open thinkorswim → click the Scan tab at the top. 2. Select Stock Hacker from the sub-tabs. 3. Click Add Filter. Add these four filters as a starting baseline: - Stock Price: between $20 and $500 (avoids penny stocks and very high-priced names where one contract ties up too much capital) - Average Volume (30-day): greater than 1,000,000 (ensures tight bid-ask spreads on the options) - Implied Volatility Percentile (IVP): greater than 40 (you want elevated IV so premiums are fat relative to recent history) - Options Volume: greater than 500 (confirms the options market is active) 4. Hit Scan. You will typically get 30–120 results depending on market conditions. 5. Sort by IV Percentile descending to see the highest-premium opportunities at the top.

From the results list, click any ticker to open its option chain. The chain shows every available expiration and strike. For covered calls, focus on the Calls side of the chain.

Reading the Option Chain and Picking Your Strike — A Real AAPL Example

Let's walk through a live-style example using Apple (AAPL). Assume AAPL is trading at $213.50 and you own 100 shares.

Open the AAPL option chain in thinkorswim. Click the expiration that is roughly 30 days out — say the monthly expiration 28 days away. The chain will show strikes in $2.50 or $5 increments around the current price.

Here is what a slice of that chain might look like:

• $215 strike (just out-of-the-money, delta ≈ 0.42): Bid $3.80 / Ask $3.90 • $220 strike (further OTM, delta ≈ 0.28): Bid $2.10 / Ask $2.20 • $225 strike (even further OTM, delta ≈ 0.16): Bid $1.05 / Ask $1.15

The delta tells you the approximate probability the option finishes in the money. A delta of 0.28 on the $220 strike means roughly a 28% chance AAPL closes above $220 at expiration — or put another way, about a 72% chance you keep the full premium.

If you sell one $220 call at the $2.10 bid, you collect $210 in premium (100 shares × $2.10). Your maximum gain on the stock is capped at $220 per share. If AAPL closes below $220 at expiration, the option expires worthless and you keep the $210 plus your shares. If AAPL closes above $220, your shares get called away at $220 — you still profit from the $6.50 move from $213.50 to $220 plus the $210 premium, but you miss any gains above $220.

To place the order in thinkorswim: right-click the $220 call row → Sell → Single. A ticket opens pre-filled with the strike and expiration. Set the order type to Limit and use the natural midpoint between bid and ask ($2.15 in this example) as your starting price. Click Confirm and Send, review the order details, and submit.

On Schwab.com (the web platform), the path is: Trade → Options → enter AAPL → select the expiration → click the $220 call row → choose Sell to Open → set quantity to 1 contract → Limit order → Review → Place Order.

What Are the Real Risks Here?

Covered calls are one of the most conservative options strategies — the Options Industry Council (OIC) classifies them as a Level 1 strategy — but they are not risk-free. Know these three risks before you trade.

Capped upside. If AAPL jumps from $213.50 to $240 before expiration, your shares get called away at $220. You miss $20 per share in gains. This is the most common frustration for new covered-call sellers. You gave up $2,000 in potential profit on 100 shares to collect $210 in premium.

Stock still falls. The premium you collect provides only a small cushion against a drop. In the AAPL example, your $210 premium offsets only about $2.10 of downside per share. If AAPL falls to $190, you lose $23.50 per share on the stock minus the $2.10 premium — a net loss of $21.40 per share. The covered call did not protect you from a serious decline.

Early assignment. American-style options (which is what most single-stock options are) can be exercised by the buyer at any time before expiration. Early assignment is rare but more likely just before an ex-dividend date. If your call is assigned early, your shares are sold at the strike price. FINRA and the OIC both publish educational material on assignment risk that is worth reading before your first trade.

Liquidity risk. If you sell a call on a thinly traded stock, the bid-ask spread can be wide — sometimes $0.50 or more. That spread is an immediate cost. Stick to stocks with average daily options volume above 500 contracts, as the scan filter above suggests.

Managing the Trade After You Sell

Selling the call is not the end of the job. You have three choices as expiration approaches.

Let it expire. If the stock stays below your strike and the option expires worthless, you keep the premium and your shares. You can then sell another call for the next expiration cycle. Many covered-call sellers repeat this process every 30 days — sometimes called a monthly wheel.

Buy it back early. If the option has lost most of its value — say it has decayed from $2.10 down to $0.25 with two weeks left — you can buy it back for $25 and close the position. You lock in $185 of the $210 maximum gain and free up the shares to sell a new call sooner. A common rule of thumb: buy back when you have captured 50–80% of the premium, then reset.

Roll the position. If the stock has risen toward your strike and you want to avoid assignment, you can buy back the current call and simultaneously sell a new call at a higher strike or later expiration. In thinkorswim, right-click the short call in your Positions tab → Create Rolling Order. The platform builds a spread ticket automatically. Rolling does not guarantee you avoid assignment, and it adds a second commission, but it can extend your income stream if done at a net credit.

Keep a simple trade log. Record the stock price when you sold, the strike, the premium collected, and the expiration date. Over time, this data tells you which stocks and strike distances have worked best for your style.

Quick Checklist Before Every Covered-Call Trade

Use this five-point check every time:

1. Do I own 100 shares per contract I plan to sell? If not, stop. 2. Is the options volume on this strike above 500 contracts and is the bid-ask spread under $0.20? If not, find a more liquid strike. 3. Is implied volatility elevated relative to its recent history (IV Percentile above 40)? Higher IV means fatter premiums. 4. Am I comfortable having my shares called away at this strike price? If the answer is no, move the strike higher or do not sell. 5. Have I checked the earnings calendar? Selling a covered call into an earnings announcement can result in a large overnight move that blows past your strike or crashes the stock well below your cost basis. The OIC recommends understanding all upcoming corporate events before entering an options position.

Do I need a special account type to sell covered calls on Schwab?

You need a standard brokerage account with at least Level 1 options approval, which covers covered calls and cash-secured puts. Apply through Profile → Upgrade Features → Apply for Options on Schwab.com. Most applicants with basic investing experience are approved within one business day.

Is thinkorswim still available after Schwab bought TD Ameritrade?

Yes. Schwab completed the TD Ameritrade integration in 2023 and kept thinkorswim as its advanced trading platform. You can log into thinkorswim using your Schwab account credentials. The platform is available as a desktop download, a web version, and a mobile app.

What strike price and expiration should I choose for a covered call?

A common starting point is a strike 3–7% above the current stock price with 21–45 days to expiration. This range tends to balance premium income against the probability of keeping your shares. The delta on that strike will typically be between 0.20 and 0.35, meaning roughly a 65–80% chance the option expires worthless.

How much money can I realistically make selling covered calls each month?

On a liquid large-cap stock like AAPL or MSFT, a 30-day out-of-the-money covered call typically yields 1–3% of the stock's value in premium per month when implied volatility is normal. Higher-volatility stocks can yield more, but they also carry more downside risk on the stock itself. Annualized, consistent covered-call selling on a diversified portfolio often adds 6–15% in additional income, though results vary with market conditions.

Will selling a covered call affect the tax treatment of my stock gains?

It can. Under IRS Section 1092, selling a deep in-the-money covered call that does not qualify as a 'qualified covered call' can suspend the holding period on your shares, potentially converting a long-term capital gain into a short-term gain if the stock is called away. Canadian investors should consult a tax professional, as the CRA's treatment of option premiums depends on trading frequency and intent. The OIC publishes a free tax guide for options traders that covers the key rules.

What happens if my covered call gets assigned before expiration?

Early assignment means the option buyer exercised their right to buy your shares at the strike price before the expiration date. Your 100 shares are sold automatically at the strike, and you keep the premium you already collected. Early assignment on calls is uncommon but more likely just before an ex-dividend date, so always check the dividend calendar when you have an open covered call.