How to Find and Sell a Covered Call on Thinkorswim: Step-by-Step Guide

The Short Answer Before We Dive In

To sell a covered call on Thinkorswim, open the Trade tab, search your stock ticker, click the Options chain, find a strike price above the current stock price, and left-click the Bid price in the Calls column to populate a Sell order. Confirm you already own 100 shares per contract, review the order ticket, and send it. That is the whole loop — everything below just makes sure you do each step correctly and understand what you are agreeing to.

What You Need Before You Place the Trade

Three things must be true before Thinkorswim will let you sell a covered call without flagging it as a naked call.

First, you need at least 100 shares of the underlying stock in the same account for every contract you plan to sell. One contract covers exactly 100 shares. If you own 250 shares of Apple, you can sell at most two contracts.

Second, your account must be approved for options trading. TD Ameritrade (now part of Charles Schwab) uses a tiered approval system. Covered calls fall under Level 1 options, the most basic tier. FINRA Rule 2360 requires brokers to collect information about your experience and financial situation before granting options approval, so if you have not applied yet, go to Client Services > My Profile > Elections & Routing and submit the options application.

Third, make sure you are comfortable with the core trade-off: you cap your upside on the stock in exchange for collecting premium today. If the stock rockets past your strike, you will be called away at that strike and miss the extra gain.

Navigating the Thinkorswim Options Chain

Log in to Thinkorswim desktop (the steps are nearly identical on the web platform and the mobile app, though menu labels differ slightly).

1. Click the Trade tab at the top of the screen. 2. Type your ticker in the symbol box at the top left and press Enter. For this walkthrough, use AAPL. 3. Below the stock quote, click the Options chain button. A grid appears showing expiration dates on the left and strike prices running down the center. 4. Choose your expiration. Click the arrow next to an expiration date to expand it. Most covered-call sellers target 21 to 45 days to expiration (DTE) because that range captures the steepest part of time decay, known as theta. The Options Industry Council (OIC) explains this decay curve in its free education library if you want the math behind it. 5. The chain shows Calls on the left side and Puts on the right. You only need the Calls side. 6. Scan the columns. The key columns are Bid, Ask, Delta, and Open Interest. If you do not see Delta, right-click any column header and add it.

Picking a Strike: A Real AAPL Example

Let's say AAPL is trading at $213.50 on a Monday morning and you own 100 shares. You want to sell one covered call expiring in 30 days.

You open the chain and look at out-of-the-money (OTM) strikes — strikes above $213.50. Here is what you might see for the $220 strike expiring in 30 days:

- Bid: $2.85 - Ask: $3.10 - Delta: 0.28 - Open Interest: 14,200

A delta of 0.28 means the market is pricing roughly a 28% chance the stock closes above $220 at expiration. That is a common starting point for sellers who want a balance between premium and the probability of keeping their shares.

If you want more premium and are willing to accept higher assignment risk, drop to the $217 strike (delta around 0.38, bid maybe $4.20). If you want to protect your shares more aggressively, move up to the $225 strike (delta around 0.18, bid maybe $1.40).

For this example, you choose the $220 strike. You will collect approximately $285 per contract (the $2.85 bid × 100 shares). That is real cash deposited into your account the same day the trade settles.

Placing the Order on Thinkorswim

Once you have chosen your strike, here is how to execute:

1. Left-click the Bid price ($2.85) in the Calls column next to the $220 strike. Thinkorswim automatically populates a Sell to Open order ticket at the bottom of the screen. 2. Check the order ticket carefully. Confirm: Action = Sell to Open, Quantity = 1 (or however many contracts you want), Strike = 220, Expiration = your chosen date, Order Type = Limit. 3. Set your limit price. Never use a market order on options — the bid-ask spread can be wide and you will give away money. Start at the midpoint between bid and ask. Here that is ($2.85 + $3.10) ÷ 2 = $2.975, which you can round to $2.98. If you do not get filled in a few minutes, lower your limit by $0.05 increments toward the bid. 4. Set the Time in Force to Day unless you have a specific reason to leave it open longer. 5. Click Review Order. Thinkorswim shows you the maximum profit ($298 if you use $2.98), the maximum loss (your stock falling to zero minus the premium collected), and the breakeven price ($213.50 − $2.98 = $210.52). 6. Click Send Order.

You will see the position appear in your Monitor tab under Today's Activity within seconds. The premium credit lands in your cash balance when the trade settles (T+1 for options under the SEC's updated settlement rules).

Risks You Should Understand Before You Hit Send

Covered calls are considered a conservative options strategy, but they carry real risks that deserve honest attention — not a footnote.

Assignment risk: If AAPL closes above $220 at expiration, your 100 shares will likely be called away at $220. You keep the $298 premium, but you no longer own the stock. If AAPL is at $235 that day, you missed $1,500 in gains. Early assignment is also possible any time before expiration if the option goes deep in the money, though it is uncommon for standard American-style equity options.

Downside is not protected: The premium of $298 offsets your loss only by $2.98 per share. If AAPL drops from $213.50 to $190, you lose $23.50 per share on the stock, and the $2.98 premium barely dents that. Covered calls reduce cost basis; they do not hedge against a large drop.

Opportunity cost: Selling the call locks your effective upside at $220 + $2.98 = $222.98. Bull markets punish covered-call sellers who cap their best positions.

Liquidity risk: Stick to stocks with high open interest and tight bid-ask spreads. AAPL, MSFT, NVDA, and SPY all have liquid options markets. Thinly traded options can cost you 10–20% of the premium just in the spread.

Tax treatment: In the US, premiums from covered calls are generally treated as short-term capital gains regardless of how long you have held the stock, and the IRS has specific rules under Section 1256 and the qualified covered call rules that can affect your holding period on the underlying shares. In Canada, the CRA treats option premiums as capital gains or income depending on your trading frequency and intent. Consult a tax professional before you scale up.

Managing the Trade After You Sell

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

Let it expire worthless: If AAPL stays below $220, the option expires with no value. You keep the full $298 and your 100 shares. You can then sell another call for the next cycle.

Buy it back early: If the option has lost 50–80% of its value before expiration — say it drops to $0.60 — many traders buy it back to close the position and free up the shares for the next trade. This is called a buy-to-close order. On Thinkorswim, go to your Monitor tab, find the position, and click the position to create a closing order.

Roll the position: If the stock is approaching your strike and you want to avoid assignment, you can roll — buy back the current call and sell a new one at a higher strike or later expiration. Thinkorswim has a built-in roll function: right-click the position in the Monitor tab and select Roll.

The CBOE publishes historical data on covered-call index performance (the BXM index tracks a systematic monthly covered-call strategy on the S&P 500) if you want to benchmark what a mechanical approach has returned over time.

Do I need special options approval to sell covered calls on Thinkorswim?

Yes. You need at least Level 1 options approval, which is the entry-level tier at TD Ameritrade/Schwab. FINRA rules require the broker to collect your financial information and trading experience before granting approval. Apply through Client Services > My Profile > Elections & Routing inside Thinkorswim.

What is a good delta to target when selling a covered call?

Most retail covered-call sellers target a delta between 0.20 and 0.35 on the call they sell. A delta of 0.30 means roughly a 30% probability the option expires in the money and your shares get called away. Lower delta means less premium but a higher chance of keeping your shares.

How many days to expiration should I choose for my covered call?

The 21-to-45-day range is the most commonly cited window because time decay (theta) accelerates in that period, which benefits the seller. The Options Industry Council (OIC) covers this in its free options education resources. Going shorter than 21 days increases gamma risk, meaning the option's delta can shift rapidly.

What happens if my covered call gets assigned before expiration?

Early assignment means the option buyer exercised their right to buy your shares before expiration. You sell your 100 shares at the strike price and keep the premium you collected. Early assignment on equity options is uncommon but most likely to happen the day before an ex-dividend date, so watch your calendar.

Can I sell a covered call on Thinkorswim mobile?

Yes. Tap the search bar, enter your ticker, scroll to the Options section, select an expiration and strike, then tap the Bid price to open a sell order ticket. The mobile app has the same core functionality as the desktop platform, though the layout is condensed.

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

In the US, premiums from selling covered calls are generally taxed as short-term capital gains, and the IRS has specific qualified covered call rules that can affect the holding period of your underlying shares. Canadian investors should note that the CRA may treat premiums as income rather than capital gains depending on trading frequency. Talk to a tax professional for your specific situation.