Wheel strategy playbook

Overview

The wheel cycles between short cash-secured puts and short covered calls. It aims to collect recurring premium while controlling entry/exit through strike selection and assignment rules.

• Start with cash or existing shares.
• Sell out-of-the-money cash-secured put (commonly 5-10% below spot).
• If put expires worthless, keep premium and repeat.
• If assigned, acquire shares at strike and lower net basis by premium collected.
• Sell out-of-the-money covered call (commonly 5-10% above spot).
• If call expires worthless, keep premium and continue covered call cadence.
• If called away, realize share gain + premium and rotate back to cash-secured puts.

Covered call cadence

Weekly and bi-weekly cadences both work. Weekly often needs more active management; bi-weekly typically balances premium and operational load.

Illustrative premium targets

These are framing benchmarks, not guaranteed outcomes. Realized returns depend on assignment, volatility regimes, slippage, and risk controls.

Premium capture heuristic: many desks close short options after ~80% credit capture rather than waiting to expiration.

Risk controls

• Define max allocation per underlying and per expiration cycle.
• Predefine roll/close rules before entry (profit target, max adverse move, DTE checkpoints).
• Track assignment risk and ensure sufficient cash/shares for obligations.
• Prefer liquid chains with tight spreads; avoid forcing entries in thin markets.
• Keep macro/event risk in view; reduce size into earnings or known volatility catalysts. Not financial advice.

Where to run this in aTx Advisor