Help /Strategy guides
The Wheel
Sell a put, take assignment, sell calls against the shares, get called away, repeat — tracked as one campaign from start to finish.
Educational, not advice. This describes a strategy and how to record it here. It is not a recommendation to trade it, and the app does not evaluate whether it suits you. See the risk disclaimer.
The idea in one paragraph
The Wheel is a loop. You sell a cash-secured put on a stock you would be happy to own, at a price you would be happy to pay. If it expires out of the money you keep the premium and sell another. If it finishes in the money you are assigned 100 shares per contract at the strike — the price you already said you would pay — and you start selling covered calls against those shares. If a call finishes in the money the shares are called away at that strike, and you are back in cash, ready to sell a put again.
The premise: you are going to spend most of your time either waiting to buy or waiting to sell. The Wheel gets you paid for the waiting.
The cycle
| Step | You do | If OTM | If ITM |
|---|---|---|---|
| 1. Cash-secured put | Sell a put at a strike you would pay, with cash set aside to buy the shares. | Keep the premium. Go back to step 1. | Assigned 100 shares per contract at the strike. Go to step 2. |
| 2. Covered call | Sell a call against the shares, usually above your net cost. | Keep the premium and the shares. Repeat step 2. | Shares called away at the strike. Back to step 1. |
What the Wheel actually is
Stripped of the narrative: a short put and a covered call have the same payoff shape. Both are long the underlying with capped upside and almost the full downside. The Wheel is a bullish-to-neutral, long-biased position that you are paid a premium to hold.
Which means the honest risks are:
- You own the downside. A stock that falls 40% falls 40% on you, minus whatever premium you collected. The premium is a cushion, not a hedge.
- Your upside is capped, twice. The put caps you at the premium; the covered call caps you at the strike. A stock that gaps up 30% leaves you holding a small credit and watching.
- Cost-basis reduction is real but it is not magic. Collecting $2 of premium against a $50 share does reduce your effective basis to $48. It does not make a $35 share worth more.
- The trap is the call after a drop. Assigned at $50 on a stock now at $40, selling a $50 call pays almost nothing, and selling a $42 call locks in the loss if it fills. This is where wheels stall for months. Picking underlyings you would hold through that is the entire risk-management story.
Running it: the choices that matter
- The underlying comes first. If you would not hold 100 shares of it through a bad quarter, no premium makes it a good wheel. Liquid options matter too — you will be trading in and out repeatedly, and wide spreads compound.
- Strike. Further out of the money means less premium and less chance of assignment. A common range is around 0.16–0.30 delta on the short put — roughly a 16–30% chance of finishing in the money.
- Duration. 30–45 days is the usual compromise: enough premium to be worth it, fast enough decay to matter, few enough trades to stay manageable.
- Volatility. Premium scales with implied volatility. High IV pays more because the risk is higher — Market Vibe gives you the broad backdrop.
- Rolling vs accepting. Rolling a threatened put out and down buys time for a credit, but it also postpones a decision indefinitely. Being assigned is not a failure — it is step 2 of the plan.
Tracking it here
One campaign for the whole wheel, from the first put to the day the shares leave. Not one per cycle: the point of the running total is to tell you whether the idea is working, and that answer is spread across every cycle.
- New Campaign → strategy Wheel, your underlying, the portfolio matching the account.
- Record each trade as it happens. At expiration, use Expire on the position — it closes the contract at $0 on the expiration date and, if it finished in the money, writes the assignment or the called-away shares at the strike for you.
- Never start a second campaign because the cycle turned over. Keep going.
A full cycle, entry by entry
A 50-strike wheel on a $52 stock, one contract:
| What happened | What you record | What the app shows |
|---|---|---|
| Sold a 50 put, 35 DTE, for $1.20 | Option · Sell · 1 · price 1.20 · strike 50 · put |
Short DTE 35. Realized P/L still $0 — premium is not earned until the contract goes away. |
| Expired worthless | Expire on the position | Realized P/L +$120, position closed. |
| Sold another 50 put for $1.35; stock fell to $47 | Option · Sell · 1 · 1.35 · strike 50 · put |
Time value shrinking, ITM marker on the dashboard, row likely pink for assignment risk. |
| Assigned at expiration | Expire — writes both trades | Put closed at $0 (+$135 realized) and 100 shares bought at $50. Net cost basis $48.45 after both premiums. |
| Sold a 50 call for $1.10 | Option · Sell · 1 · 1.10 · strike 50 · call |
Positions table shows both legs; total delta drops as the short call offsets the shares. |
| Stock recovered; called away at 50 | Expire — writes both trades | Call closed at $0, 100 shares sold at $50. Campaign flat, all P/L realized. |
Total realized: $120 + $135 + $110 in premium, plus $0 on the shares — bought at 50, sold at 50 — less commissions. The stock went nowhere and the campaign made $365. That is the wheel working exactly as intended, and it is also the best case.
What to watch, and where
| Question | Where to look |
|---|---|
| How much of this premium have I earned? | Time Value on the dashboard, with its change %. Down to a few cents means the trade is done — consider closing early and redeploying rather than waiting out the last day. |
| Am I about to be assigned? | A pink row with the assignment-risk reason: a short leg in the money with almost no time value left. That is the shape of an early assignment. |
| Where do I actually break even now? | The campaign header's break-even (with realized) — the current position adjusted for every premium you have already banked. |
| How much is this wheel tying up? | Capital. A cash-secured put under Reg-T is not charged the full strike, so compare against what your broker actually holds. |
| Is the wheel working over months? | Reports, filtered to this underlying, grouped by campaign, All time. |
Two things people get wrong in the records
- Recording the premium as profit on the day it is sold. It is not. Realized P/L moves when the short lot closes. Until then a sold put reads as $0 realized with unrealized P/L moving against the mark.
- Forgetting the assignment leg. If you close the put manually and never record the 100 shares, the campaign looks like it made money and holds nothing. Use Expire and both legs are written for you, correctly dated.
Short on capital for a $50 stock? The PMCC is the same covered-call income shape for a fraction of the outlay — with its own trade-offs.