A cycle between CSP and Covered Call: sell a put → Assignment → sell a call → called away → back to the put.
The structure
The Wheel Strategy (Wheel Strategy) is a three-stage cycle that repeats. Sell cash-secured puts on a stock you want to own. If you get assigned the shares, sell covered calls against them. If the shares are called away, the wheel goes back to selling puts.
How it works
Collecting premium at every stage of your relationship with a stock: before you own it (selling puts) and while you hold it (selling covered calls). The seller doesn't chase the trend. They sell time again and again on an asset they're happy to own at a price they chose.
Its strict requirement
A quality stock you could hold for a long time, with decent option liquidity. A wheel on a poor stock ends with you holding the poor stock through a long decline, and premiums that don't fill the hole. Picking the stock is ninety percent of the decision.
Hypothetical example
A stock at $42: sell a put with a $40 strike each month for a $0.90 premium. Three months with no assignment: $270 in net premium. In the fourth month the stock is assigned at $40, so you sell a call with a $43 strike for a $1 premium. It's called away two months later. The cycle earned premiums plus a gain on the shares.
Common mistake
Breaking the rules at the first sign of pain: refusing assignment by rolling the contract at a growing loss, or selling the call below your cost basis so a profit becomes impossible. The wheel is boring by design, and breaking that boredom is how it loses.
Where the wheel breaks
Picking a symbol you don't want to own. The wheel assumes that receiving the shares is an acceptable outcome, not a disaster. Run it on a collapsing symbol and you end up holding an asset that keeps falling while the small premiums don't make up for it. Choosing the stock comes before the mechanics.
Where to see it on the platform
Its two components (cash-secured put and covered call) are in the options calculator, and the platform's trading journal tracks its cycles trade by trade.
The calculator works out all three stages, and the strategy guide suggests it when you want to own the stock and volatility pays well.
