How to Sell a Covered Call on Charles Schwab's thinkorswim Platform: Step-by-Step Tutorial

The Short Answer: Three Clicks to Your First Covered Call on thinkorswim

You can sell a covered call on thinkorswim by opening the Trade tab, pulling up the options chain for a stock you already own at least 100 shares of, right-clicking the call strike you want, and selecting "Sell" then "Single." The order ticket populates automatically, and you confirm the credit you will receive before sending. That is the whole process — the rest of this guide walks you through each step in detail so nothing surprises you.

What You Need Before You Place the Trade

Three things must be in place before thinkorswim will let you sell a covered call.

First, you need at least 100 shares of the underlying stock in your Schwab account. One standard options contract covers exactly 100 shares. If you own 250 shares, you can sell a maximum of two contracts and still be fully covered.

Second, your account needs options trading approval at Level 1 (covered calls) or higher. Schwab and FINRA require brokers to assess your experience and financial situation before granting options access. If you have not applied yet, go to Account > Upgrade Features > Options Trading inside the Schwab website and complete the application. Approval is usually instant for Level 1.

Third, make sure you are using the thinkorswim desktop platform or the thinkorswim web version. The mobile app works too, but the desktop layout is easier to learn on. Schwab completed its full migration of TD Ameritrade accounts to Schwab in 2024, so your login is now at schwab.com — thinkorswim itself is unchanged.

Step-by-Step: Selling a Covered Call on thinkorswim

Here is the exact sequence using a real example. Suppose you own 100 shares of Apple (AAPL) purchased at $210. AAPL is currently trading at $213.50.

**Step 1 — Open the Trade tab.** At the top of thinkorswim, click the "Trade" tab. In the symbol box, type AAPL and press Enter. The stock quote and options chain appear below.

**Step 2 — Set your expiration.** The options chain defaults to the nearest weekly expiration. For this example, choose the expiration that is 21 to 30 days out — a common sweet spot where time decay (theta) is meaningful but the premium is still worth collecting. Click the expiration date row to expand it.

**Step 3 — Choose your strike.** You want to sell a call above the current price (out-of-the-money) so you keep your shares unless AAPL rallies hard. Look at the Calls side on the left. The $217.50 strike is showing a bid of $1.85 and an ask of $1.90. The delta on that strike is roughly 0.28, meaning the market is pricing about a 28% chance AAPL closes above $217.50 at expiration. A delta between 0.20 and 0.35 is a common starting range for income-focused covered call sellers.

**Step 4 — Place the sell order.** Right-click on the $1.85 bid price in the $217.50 row. A menu appears. Select "Sell" then "Single." The order ticket opens at the bottom of the screen. It will show: SELL 1 AAPL 21-day $217.50 CALL at a limit price of $1.85 credit.

**Step 5 — Review the order ticket.** Confirm the following before clicking Send: (a) Action = SELL TO OPEN, (b) Quantity = 1 contract, (c) Order type = LIMIT, (d) Price = $1.85 credit. The "Sell to Open" label is important — it tells the platform you are opening a new short call position, not closing an existing one.

**Step 6 — Send the order.** Click "Confirm and Send." A summary screen shows your maximum gain, maximum loss, and breakeven. Review it, then click "Send."

Once filled, you collect $185 in premium (100 shares × $1.85) immediately credited to your account. Your new breakeven on the stock position drops from $210.00 to $208.15.

What Are the Real Risks Here?

Covered calls are one of the most conservative options strategies, but risks are real and you should understand them before your first trade.

**Capped upside.** If AAPL rockets from $213.50 to $230 before expiration, you are obligated to sell your shares at $217.50. You keep the $1.85 premium, but you miss the gain above $217.50. On 100 shares that is $1,250 in missed profit. This is the core trade-off: you exchange unlimited upside for immediate income.

**Assignment risk.** The buyer of your call can exercise it at any time before expiration (American-style options). Early assignment is rare but happens most often just before an ex-dividend date. If AAPL goes ex-dividend and your call is in-the-money, watch for early assignment. The Options Industry Council (OIC) has detailed materials on early exercise risk that are worth reading before you trade around earnings or dividend dates.

**Stock still falls.** The $1.85 premium only cushions a $1.85 drop. If AAPL falls to $190, you still own shares worth $190. The covered call did not protect you below $208.15. Covered calls reduce downside slightly; they do not eliminate it.

**Liquidity risk.** Stick to liquid underlyings with tight bid-ask spreads. AAPL, MSFT, NVDA, and SPY all have penny-wide spreads on popular strikes. Thinly traded stocks can have $0.50 spreads or wider, which eats your premium before you even start.

**Margin and account type.** In a standard margin account, covered calls require no additional margin because your shares are the collateral. In an IRA, Schwab allows covered calls but not naked calls. FINRA Rule 4210 governs margin requirements — your broker enforces these automatically.

How to Monitor and Close the Position

After your order fills, find the position under the Monitor tab > Activity and Positions. You will see your long stock and your short call listed separately.

To close early, right-click the short call row and select "Buy to Close." If the call has lost value — say AAPL stayed flat and 15 days have passed — you might be able to buy it back for $0.65, locking in $1.20 of the original $1.85 premium and freeing up the shares for a new trade or sale.

A common rule of thumb: consider closing when you have captured 50% to 80% of the maximum premium. At that point, most of the easy theta decay has already happened, and you are taking on more risk for diminishing reward by holding to expiration.

If the call expires worthless (AAPL closes below $217.50 on expiration Friday), thinkorswim automatically removes it from your positions at 4:00 p.m. ET. You keep the full $185 and your 100 shares. You can then sell a new call for the next cycle.

Tax Treatment: What Schwab Reports and What You Owe

The IRS treats covered call premiums as short-term capital gains in most cases, regardless of how long you have held the underlying stock. This is a point many new traders miss.

Specifically, IRS Publication 550 explains that writing a covered call can suspend the holding period of your stock if the call is "in the money" at the time you write it. An out-of-the-money call on stock you have held for over a year generally does not disrupt your long-term holding period, but the rules are detailed. Consult a tax professional if you are managing a large position or are close to the one-year threshold.

Schwab will issue a Form 1099-B at year end showing all options premiums received and any gains or losses from closing trades. Canadian investors using a Schwab account should also be aware that the Canada Revenue Agency (CRA) has its own rules on options income — premiums received are generally treated as capital gains or income depending on your trading frequency and intent.

Keep records of every trade: the premium received, the date opened, the date closed or expired, and the strike. thinkorswim's Account Statement tool under the Monitor tab exports this data to CSV.

Quick Troubleshooting: Common thinkorswim Issues

**"Sell" is grayed out on the options chain.** Your options approval level is likely not yet active. Log into schwab.com, check your account features, and confirm Level 1 approval is showing. It can take one business day to activate after approval.

**Order rejected with "insufficient shares."** thinkorswim checks that you hold 100 shares per contract in the same account. If your shares are in a different Schwab account, the system will not see them as covering the call. Make sure shares and the options trade are in the same account number.

**The bid-ask spread is very wide.** You are likely looking at a low-volume expiration or an illiquid strike. Move to a closer expiration or a strike nearer to the current price where more traders are active. For AAPL, the weekly and monthly expirations at strikes within $10 of the current price are almost always liquid.

**Platform shows "Sell to Close" instead of "Sell to Open."** This happens if thinkorswim thinks you already have a long call at that strike. Double-check your positions under the Monitor tab. If you do not hold a long call there, try logging out and back in, or call Schwab support at 800-435-4000.

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

Yes. Schwab requires at least Level 1 options approval to sell covered calls, which is the entry-level tier. You apply through your Schwab account settings under Upgrade Features, and FINRA rules require Schwab to verify your trading experience and financial situation before granting access. Most applicants with basic investing experience are approved for Level 1 quickly, sometimes within minutes.

What does 'Sell to Open' mean on thinkorswim and why does it matter?

Sell to Open means you are creating a new short options position, which is exactly what you do when selling a covered call. The alternative, Sell to Close, would mean you are closing an existing long call you already own. Choosing the wrong one is a common beginner mistake, so always confirm the order ticket says Sell to Open before you send.

How much premium can I realistically collect selling covered calls on AAPL?

Premium varies with volatility, time to expiration, and how far out-of-the-money your strike is. On a 30-day, $5-to-$7 out-of-the-money AAPL call, premiums have historically ranged from roughly $1.50 to $3.00 per share, or $150 to $300 per contract. Higher implied volatility periods — like around earnings — push premiums up, but selling through earnings also carries much higher assignment and gap risk.

What happens if my covered call goes in the money before expiration?

If AAPL rises above your strike before expiration, your call is in the money and you face potential assignment, meaning the buyer exercises and you must sell your 100 shares at the strike price. You keep the premium you collected, but you lose any gain above the strike. You can buy the call back at a loss to close the position early and keep your shares if you believe the stock will keep rising.

Can I sell covered calls in a Schwab IRA or Roth IRA on thinkorswim?

Yes, Schwab allows covered calls in both traditional and Roth IRAs at Level 1 approval. Because IRAs cannot use margin, your shares must be fully held in the IRA to cover the call — you cannot use shares from a separate taxable account. The tax-deferred or tax-free nature of the IRA means premiums collected do not create an immediate tax event, though IRS rules on IRA distributions still apply when you withdraw funds.

How do I roll a covered call to a later expiration on thinkorswim?

Rolling means buying back your existing short call and selling a new one at a later expiration, usually for a net credit. On thinkorswim, right-click your short call in the Monitor tab and select Create Rolling Order — the platform builds a spread order that closes the near-term call and opens the next one simultaneously. Executing it as a single spread order reduces the risk of being partially filled at bad prices.