Options Income
The Wheel Strategy
A four-stage cycle built entirely on stock you're willing to own at a price you already picked. Sell a put, maybe get assigned, sell a call against the shares, maybe get called away, then start over.
Click through the cycle
Click any of the four stages on the wheel to see exactly what happens there, what you collect, and which of two outcomes sends you forward or keeps you in place. Or hit play and watch it spin through the full cycle on its own.
How it works
The Concept, At A Glance
- Every stage collects premium. Whether you're holding a put or a call, you're always short an option and always the one getting paid to wait.
- Assignment isn't a failure, it's a planned branch. The strike on the put is chosen as a price you'd genuinely be willing to own the stock at. Getting assigned moves you to the next stage, it doesn't break the strategy.
- The whole cycle is built around one position of stock at a time. You're never running both a put and a call simultaneously on the same shares, the wheel is sequential, not simultaneous.
- The full "return" includes every premium collected along the way. Even a stage that ends in the shares getting called away for a modest gain includes every put and call premium collected before that point.
Where this breaks
Assignment during a real decline
The wheel assumes the stock is one you're fine owning long-term. If it isn't, and the put strike was picked for premium size instead of conviction, assignment during a genuine downtrend leaves you holding shares that keep falling while the covered call premium you can collect against them shrinks along with the price. The cycle still technically works, on a smaller and smaller position each time.