How to Set Up a Covered Call Screener in thinkorswim: Step-by-Step Guide

The Short Answer: Here Is How to Build the Screener

To set up a covered call screener in thinkorswim, open the platform, go to the Scan tab, select Stock Hacker, and add filters for price, implied volatility, and option liquidity. Then switch to the Options Statistics scan to layer in strike-level filters like delta and open interest. The whole setup takes about ten minutes once you know which filters to use.

This guide walks you through every click, explains what each filter does, and shows you a live example using AAPL so you can copy the exact numbers into your own scan.

Why Bother Building a Screener at All?

Selling covered calls without a screener is like fishing without knowing where the fish are. You might get lucky, but you waste a lot of time. A good screener narrows a universe of thousands of stocks down to the handful that actually meet your income criteria on any given week.

The three things that make a covered call worth selling are premium that pays you enough to bother, a stock you are comfortable holding if the call goes against you, and an options market liquid enough that you can get filled near the midpoint. A screener finds all three at once.

According to the Options Industry Council (OIC), liquidity — measured by open interest and tight bid-ask spreads — is one of the most important factors retail traders overlook when selecting options. A screener forces you to filter for it every time.

Step 1: Open Stock Hacker and Set Your Stock-Level Filters

Log into thinkorswim. At the top of the platform, click the Scan tab. In the left panel, select Stock Hacker. This is where you filter the underlying stock before you ever look at the options chain.

Add these four filters by clicking Add filter > Stock > and choosing each one:

1. Last Price — set minimum to $20 and maximum to $500. Stocks below $20 often have wide option spreads and low liquidity. Stocks above $500 require large capital commitments per contract.

2. Average Volume (30-day) — set minimum to 1,000,000. High share volume almost always means higher options volume.

3. Market Cap — set minimum to $5 billion. Larger companies tend to have more stable options markets and tighter spreads.

4. Implied Volatility Percentile (IV Percentile) — set minimum to 30. This tells you that current implied volatility is higher than at least 30% of all readings over the past year. Higher IV means fatter premiums. CBOE research consistently shows that elevated IV environments produce better premium-to-risk ratios for covered call sellers.

Click Scan at the bottom. You will likely get 80 to 200 results depending on market conditions. That is still too many, so move to Step 2.

Step 2: Add Options-Level Filters in Options Statistics

Still inside Stock Hacker, click Add filter > Study > and type 'OpenInterest' in the search box. Select it and set the minimum to 500. This ensures the options chain has enough activity that your order will not move the market.

Next, add a filter for Bid-Ask Spread. Click Add filter > Options > Bid-Ask Spread and set the maximum to $0.15 for stocks under $100, or $0.25 for stocks over $100. A spread wider than that eats into your premium before you even get filled.

Finally, add a Delta filter. Click Add filter > Options > Delta and set the range from 0.20 to 0.35. This targets out-of-the-money calls that give you a roughly 20% to 35% chance of expiring in the money — meaning a 65% to 80% chance you keep the full premium. The OIC describes delta as a probability proxy, and a delta of 0.25 is a common starting point for income-focused covered call sellers.

Set your expiration range to 21 to 45 days to expiration (DTE). This window captures the steepest part of theta decay, which is the daily erosion of option value that works in your favor as a seller. Click Scan again. You should now see 10 to 30 names.

Step 3: A Real Example Using AAPL

Let us say AAPL is trading at $213.50 and your scan surfaces it as a candidate. You own 100 shares. Here is how you evaluate the trade.

Open the AAPL options chain by clicking the ticker in your scan results, then selecting Trade > All Products > Options Chain. Set the expiration to the Friday that is 30 days out. Look at the calls column.

The $220 strike call — about 3% out of the money — is showing a bid of $2.85 and an ask of $2.95. The delta is 0.28, which fits your filter. Open interest is 12,400 contracts. The bid-ask spread is $0.10, well inside your $0.15 limit.

If you sell one contract (100 shares) at the midpoint of $2.90, you collect $290 in premium before commissions. That is a 1.36% return on your $213.50 cost basis in 30 days, or roughly 16% annualized if you can repeat it monthly. Your breakeven on the downside is $213.50 minus $2.90, which equals $210.60. AAPL would have to fall below that level before you start losing money on the combined position.

If AAPL closes above $220 at expiration, your shares get called away at $220. You still keep the $2.90 premium, and you also capture $6.50 in stock appreciation from $213.50 to $220. Total gain on the trade: $9.40 per share, or $940 on 100 shares. The trade-off is that you give up any gains above $220.

What Are the Real Risks You Need to Know Before You Start?

Covered calls are not a free lunch. FINRA classifies covered call writing as a Level 1 options strategy, the lowest risk tier, but that does not mean risk-free.

The biggest risk is stock loss, not option loss. If AAPL drops from $213.50 to $190, your $2.90 premium only offsets $2.90 of that $23.50 decline. You still lose $20.60 per share on the stock position. The covered call reduces your loss but does not eliminate it. This is why the OIC and most brokerage education materials emphasize that you should only sell covered calls on stocks you are genuinely willing to hold through a drawdown.

The second risk is capped upside. If AAPL jumps to $240 after you sold the $220 call, you miss $20 per share of gains above the strike. You collect your $2.90 and your $6.50 of stock appreciation up to $220, but nothing above that.

The third risk is assignment timing. The SEC notes that American-style options — which most single-stock options are — can be exercised early by the buyer at any time before expiration. Early assignment is rare but it does happen, especially around ex-dividend dates. Check the dividend calendar before you sell a call that spans a dividend payment date.

On the tax side, the IRS treats covered call premiums as short-term capital gains in most cases, regardless of how long you have held the stock. Canadian investors should note that the CRA has its own rules around option premiums and adjusted cost base — consult a tax professional before your first trade.

How to Save Your Scan and Run It Every Week

Once your filters are set, click the floppy-disk icon at the top right of the Stock Hacker panel and name your scan something like 'CC Weekly Screen.' thinkorswim saves it under your personal scans and you can rerun it in one click every Monday morning.

Consider running the scan twice: once with IV Percentile set to 30 minimum for normal weeks, and once with IV Percentile set to 50 minimum during earnings season or periods of market stress. Higher volatility weeks produce higher premiums but also more risk of sharp moves in the underlying.

You can also set up a watchlist column to show the 30-day at-the-money implied volatility for every stock in your results. In thinkorswim, right-click any column header in the watchlist, select Customize, and add Impl Vol from the options statistics group. This lets you sort your scan results by premium richness at a glance.

Run your scan, pick two to four names that meet all your criteria, check the earnings calendar to avoid selling through a report date, and place your orders at or near the midpoint of the bid-ask spread. Repeat the following week.

Do I need a special options approval level in thinkorswim to sell covered calls?

Yes. thinkorswim requires at least Level 1 options approval to sell covered calls, which is the entry-level tier. You apply through the Account Management section of the platform and TD Ameritrade/Schwab reviews your application based on experience and financial information. FINRA rules require brokers to assess suitability before granting options trading access.

What delta should I use when screening for covered calls?

Most income-focused covered call sellers target a delta between 0.20 and 0.35 on the short call. A delta of 0.25 means the option has roughly a 25% chance of expiring in the money, so you keep the full premium about 75% of the time. The OIC describes delta as an approximate probability measure, though it is not a guarantee of any specific outcome.

How many days to expiration is best for a covered call screener?

The 21 to 45 days to expiration (DTE) window is the most commonly cited range among options income traders because theta decay accelerates in that period. Selling at 30 to 45 DTE and closing the position at 50% profit or around 21 DTE is a popular management rule that balances premium collected against time in the trade.

Can I use the thinkorswim screener on the mobile app?

The thinkorswim mobile app has a basic scan feature, but the full Stock Hacker with custom options-level filters is only available on the desktop platform. For building and saving a covered call screener with delta and open interest filters, use the desktop or web version of thinkorswim.

Are covered call premiums taxed as ordinary income or capital gains?

In the United States, the IRS generally treats premiums received from selling covered calls as short-term capital gains, not ordinary income, and they are reported in the tax year the option expires, is closed, or is exercised. However, covered calls can affect the holding period of your underlying shares in certain situations, so consult a tax professional familiar with IRS Publication 550 for your specific situation. Canadian investors should check CRA guidance, as option premium treatment can differ depending on whether trading is considered a business activity.

What is a good minimum open interest to filter for when screening covered calls?

A minimum open interest of 500 contracts at the specific strike you plan to trade is a reasonable starting floor, and many experienced sellers prefer 1,000 or more. Higher open interest means more market participants, which typically results in tighter bid-ask spreads and easier fills near the midpoint. The OIC highlights open interest as a key liquidity indicator for retail options traders.