Free calculator
Wheel strategy calculator
Model both stages of the wheel: the initial cash-secured put, the assigned cost basis, and the covered call that completes the cycle.
Wheel stages
Cycle result
- Initial cash requirement
- $9,500.00
- Put premium
- $180.00
- Assigned cost basis
- $93.20
- Adjusted basis after call premium
- $91.20
- Total premium income
- $380.00
- Outcome if called away
- $880.00
- Cycle return if called
- 11.16%
- Annualized estimate
- 90.31%
Stage C payoff (shares + short call)
If assigned at $95.00, selling the $100.00 call for $2.00 lowers the effective basis to $91.20. If the call is exercised the shares are sold at $100.00; if not, you keep the shares and the premium and can repeat.
Assumptions and limits
- One put then one call per 100 shares; each stage is modelled over the same number of days.
- Dividends, early assignment and rolling are not modelled.
Modelling the cycle
Stage A sells a cash-secured put. If it expires worthless you keep the premium and repeat. If it is assigned you buy shares at the strike, and the effective basis is the strike minus the put premium.
Stage C sells a covered call against the shares. The call premium lowers the adjusted basis; if the shares are called away the cycle completes and the return combines both premiums and any share gain.
FAQ
- Is the wheel a guaranteed income strategy?
- No. Assigned shares can fall below the basis, and rolling down compounds risk.
- How is cycle return calculated?
- Total premium plus the share gain to the call strike, divided by the initial cash secured.
- What if the call is not exercised?
- You keep the shares and the call premium and can sell another call, repeating Stage C.