The Wheel Strategy

The Options Wheel Strategy Calculator

Calculate your income and cost-basis discount for the "Wheel" strategy. Find out your annualized yield from selling cash-secured puts.

Put Setup (Phase 1)

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Phase 1: The Put

In this phase, you sell a Cash Secured Put. You get paid cash today to promise you will buy the stock at the strike price if it drops. It's like being paid to place a "Limit Buy" order.

Immediate Premium Income
$150
3.33% Yield
Annualized: 40.6%
Effective Cost Basis
$43.50
3.33% Discount from Strike

If shares are assigned to you

Strategy Check: You have enough cash to secure this put. This is a conservative, professional setup.

The Options Wheel: A Beginner's Guide

How the Wheel Works

  1. Step 1: Sell a Put. You pick a stock you like and sell a Cash Secured Put. You collect premium.
  2. Step 2: Wait. If the stock stays above the strike, you keep the premium and repeat Step 1.
  3. Step 3: Assignment. If the stock drops, you buy the shares at the strike price (which is effectively cheaper because of the premium you collected).
  4. Step 4: Sell a Call. Now that you own the shares, you sell a Covered Call against them. You collect more premium.
  5. Step 5: Completion. If the stock rises, the shares are called away, you keep all the premium, and you start back at Step 1.

Why Traders Love the Wheel

The Wheel is a Neutral to Bullish strategy. It allows you to collect income in three ways:

  • Premium from selling Puts.
  • Premium from selling Calls.
  • Capital appreciation of the stock.

The Golden Rule:

Only "Wheel" stocks that you actually want to own for the long term. If you use this strategy on a junk stock that crashes to zero, the premiums will not save you.

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