The Wheel
Cycle: cash-secured put → assignment → covered call → assignment → repeat. Systematic income.
Max profit
Cumulative premium across cycles plus capital gains on the share leg.
Max loss
Equivalent to long stock from the strike of the assigned put, minus all premiums collected.
Breakeven
Initial put strike - sum of premiums collected across the cycle.
Structure
Sell CSP. If assigned, sell CC against the shares. If shares called away, sell another CSP.
When to use
On wheelable names: large-cap, low business risk, IV rank 20-50, and stocks you would happily own at half the strike.
Example
AAPL wheel. Short 180 put → assigned at $178 effective → short 185 call → assigned at $185. Cycle profit $950 over 60 days on $18,000 capital, ~32% annualised.
Notes
- Breaks down badly on stocks that trend down. Filter ruthlessly on stock quality.
Build it in the simulator
Open this structure in the app, adjust spot, IV, and DTE, and watch the payoff and Greeks move.
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