Free Tool
Wheel Strategy Calculator
The wheel sells cash-secured puts until assignment, then covered calls until the shares are called away — collecting premium at every turn. Enter both legs and see the income, your cost basis after assignment, and what a full cycle returns on the cash you put up.
Leg 1 — Sell a cash-secured put
Leg 2 — Sell a covered call if assigned
Step 1 · Sell the put — collect premium while you wait
Cash required
$9,500
Premium collected
$200
Return on cash (30d)
2.11%
Annualized
25.6%
If the stock stays above $95, the put expires, you keep $200, and the wheel restarts at step 1. If it finishes below, you’re assigned 100 shares at an effective $93.00 each.
Step 2 · Assigned? Sell the call against your shares
Cost basis / share
$93.00
Premium collected
$250
Adjusted basis
$90.50
Annualized
32.7%
The call premium lowers your basis to $90.50. If the stock stays below $100, you keep shares and premium and repeat step 2. If it rises above, your shares are called away — completing the wheel.
Full cycle · Assigned at $95, called away at $100
Total premium
$450
Share gain / loss
$500
Return on cash (60d)
10.00%
Annualized
60.8%
Total cycle profit (1 contract)
$950
One full turn of the wheel: you reserve $9,500, collect $200 selling the $95 put, get assigned at a $93.00 basis, collect $250 selling the $100 call, and are called away — netting $950 over 60 days (60.8% annualized). The real risk is the stock falling far below your put strike and staying there — you’d hold shares at a loss, selling calls to grind the basis down. Figures exclude commissions, fees, taxes, dividends, and early assignment.
How to Use It
- 1. Enter the put leg — the strike you’d accept shares at, the premium, and days to expiration.
- 2. Enter the call leg — the strike you’d let shares go at (usually above your basis), premium, and days.
- 3. Read it as a story — step 1 repeats until assignment, step 2 repeats until called away, and the cycle panel totals one full turn.
- 4. Compare annualized numbers — they put a 30-day and a 45-day leg on the same footing.
How a Wheel Cycle Is Calculated
- Cash reserved = put strike × 100 × contracts
- Basis if assigned = put strike − put premium
- Cycle profit = (put prem + call prem + call strike − put strike) × shares
- Annualized = (cycle profit ÷ cash reserved) × (365 ÷ total days)
Model each leg on its own with the cash-secured put calculator and the covered call calculator. For the mechanics behind assignment, see Exercise, Assignment, and Expiration, and for why selling options caps reward in exchange for income, see Risk and Reward Profiles.
Frequently Asked Questions
What is the wheel strategy?
The wheel is an income loop with two repeating steps. Step one: sell cash-secured puts on a stock you would be happy to own, collecting premium; repeat until you are assigned. Step two: once assigned, sell covered calls against the shares, collecting more premium; repeat until the shares are called away. Then the wheel starts over at step one. Every step generates option premium, and the strategy is popular with income-focused traders.
How is the wheel strategy return calculated?
For a full cycle, add all the premium collected (puts plus calls) to the share gain or loss between the put strike where you were assigned and the call strike where you were called away, then divide by the cash you had to reserve for the put. Scale by 365 over the total days in the cycle to annualize. Premium is the reliable part of the return; the share-price leg can be positive or negative.
What is the biggest risk of the wheel?
A large drop in the stock after assignment. The wheel wins when the stock drifts sideways or up, but if it falls far below your put strike you own shares at a meaningful loss, and the call premium you can collect against them shrinks. Selling calls below your cost basis to compensate risks locking in the loss if the stock rebounds. That is why wheel traders emphasize running it only on stocks they genuinely want to own.
Should I pick a call strike above my cost basis?
Usually, yes. Your cost basis after assignment is the put strike minus the premiums collected. Selling a call below that basis means a rally forces you to sell shares for less than you effectively paid. Most wheel traders sell calls at or above their basis so a called-away finish always completes the cycle at a profit.
Is assignment a bad outcome in the wheel?
No — assignment is part of the design. Being assigned means buying a stock you pre-approved at an effective discount (strike minus premium), and it moves the wheel to its covered-call phase. The strategy only breaks when assignment happens on a stock you did not actually want to hold through a decline.
Educational tool only. This calculator models one idealized wheel cycle held to expiration and excludes commissions, fees, taxes, dividends, early assignment, and the scenario where the stock falls sharply after assignment. It is not financial advice.