Options Strategy Guide
The Wheel Strategy
Sell puts until assigned, sell calls until called away — repeat.
Beginner
Neutral to Bullish
Consistent income, full downside exposure if stock falls
The Simple Version
Plain English — no jargon
The Wheel is like a vending machine that pays you. Step 1: Sell a put — collect cash. If you get the stock, go to Step 2: Sell a call on those shares — collect more cash. When the shares get taken away, go back to Step 1. You keep spinning the wheel and collecting premium the whole time.
How It Works — Step by Step
- 1 Phase 1: Sell a cash-secured put on a stock you want to own
- 2 Collect premium. If stock stays above strike — keep premium, repeat Phase 1.
- 3 If stock falls below strike — get assigned 100 shares at strike price
- 4 Phase 2: Now sell a covered call on those shares at or above your cost basis
- 5 Collect more premium. If stock rises above call strike — shares get called away.
- 6 Return to Phase 1 and start again.
Real Example
AMD
Illustrative example — not a recommendation
Stock Price
$160.0
Strike Price
$155.0
Premium Collected
$3.2/share
Days to Expiration
30d
Max Profit
$320
Breakeven
$151.8
Annualized Return
24.8%
When to Use It — and When Not To
✓ Use when
- You want consistent income from options premium
- You are comfortable owning the underlying stock
- The stock is in a sideways or mildly bullish trend
- Implied volatility is elevated
✗ Avoid when
- The stock is in a strong downtrend
- You are not willing to hold shares if assigned
- The stock has low liquidity or wide bid-ask spreads
- You need the capital tied up as collateral for other purposes
Greeks & Mechanics (for the experienced trader)
Delta
Positive when holding shares (Phase 2). Negative when short put (Phase 1).
Theta
Always positive — time decay works in your favor in both phases.
Vega
Negative — you benefit from IV declining after you sell premium.
Gamma
Negative in both phases — large directional moves work against you.
Key Risks
- If stock crashes in Phase 1, you buy shares at a high strike and are stuck holding a loss
- Opportunity cost — capital is locked up in collateral
- Not market-neutral — you have full downside exposure to the stock
Related Strategies
Ready to find The Wheel Strategy opportunities?
Screen live contracts ranked by premium, probability, and return — updated daily.