The wheel end to end, the long-dated positions around it, and the mechanics underneath — one article at a time.
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The wheel is an options income strategy built from two simple trades, run back-to-back on a stock you'd be comfortable owning: selling a cash-secured put to collect premium while you wait to potentially buy shares at a discount, and selling a covered call against shares you already hold to collect more premium while you wait to potentially sell them at a profit.
It's called the "wheel" because the two trades feed into each other in a cycle — assignment on a put turns into shares you can sell calls against, and having those shares called away turns back into cash you can sell puts against. Round and round, collecting premium at every turn.
Sell a cash-secured put
Set aside strike × 100 × contracts in cash. Collect premium upfront.
Expires OTM, or you get assigned
Above strike: put expires worthless, repeat step 1. Below: you buy 100 shares/contract at the strike.
Sell a covered call
Against the shares you now hold. Collect more premium upfront.
Expires OTM, or shares get called away
Below strike: call expires worthless, repeat step 3. Above: shares are sold at the strike, back to step 1.
Cash-Secured Puts
Getting paid to wait for a price you'd be happy to buy at — and what it costs when you're wrong.
Covered Calls
Renting out shares you already own — and the one strike rule that stops it going wrong.
Assignment
The part that makes people nervous, and why on the wheel it's usually just the plan working.
Rolling
Buying back and re-selling to buy time — and the honest test for whether it's helping.
Choosing Stocks for the Wheel
The selection step that decides most of your outcome, before any strike is chosen.
ITM, OTM, Breakeven & Cost Basis
The four numbers you need before opening anything, and what they mean from the seller's side.
The Greeks & Implied Volatility
Four numbers that tell you what a position will do next. Delta and IV rank do most of the work.
Risk & Position Sizing
The part that decides whether a bad month is annoying or account-ending.
Taxes on the Wheel
How premium is treated, why assignment isn't taxable, and where wash sales bite wheel traders.
Put Credit Spreads
A cash-secured put with a floor bolted on — far less capital, and no shares at the end.
Iron Condors
Selling both sides at once and getting paid for a stock going nowhere.
Collars
Trading away your upside to put a floor under a holding you don't want to sell.
Calendar & Diagonal Spreads
Selling a near-dated option against a longer-dated one — the family the PMCC belongs to.
Straddles & Strangles
Trading movement itself, in either direction — and the one version with genuinely unlimited risk.
What is the wheel strategy in options trading?
A repeating cycle of selling a cash-secured put, then (if assigned) selling covered calls against the shares, collecting premium at every step. The cycle diagram above walks through all four stages.
What is a cash-secured put?
Selling a put option while setting aside enough cash (strike × 100 × contracts) to buy the shares if assigned. You collect premium upfront; if the stock stays above the strike the put expires worthless and you keep it, if it falls below you buy the shares at the strike.
What is a covered call?
Selling a call option against shares you already own. You collect premium upfront; if the stock stays below the strike the call expires worthless, if it rises above the strike your shares get called away (sold) at that price.
What are LEAPS in options trading?
Long-dated options, typically expiring a year or more out, bought outright rather than sold for premium. Traders use deep in-the-money LEAPS calls as a lower-capital substitute for owning shares.
What is a poor man's covered call?
A diagonal spread that replaces the 100 shares in a covered call with a long-dated in-the-money call. It needs roughly a third of the capital, but the long call expires and can lose its entire value, which shares cannot.
What do ITM, OTM, and ATM mean on an option?
In, out of, and at the money — where the stock price sits relative to the strike. For an option seller, out of the money means the contract is on track to expire worthless so you keep the premium.
Is assignment bad on the wheel strategy?
No. Assignment on a cash-secured put means buying a stock you already agreed to buy at a price you already chose, having been paid a premium to wait. It is the mechanism the strategy runs on rather than a failure of it.
Educational only
These guides explain how options strategies work. They are not investment, financial, or tax advice, and options carry real risk of loss. Start with risk and position sizing before trading any of them.