Wheel Strategy Calculator
Follow one cycle of selling a put, taking assignment and selling a call, with cost basis at each step and the return on the cash tied up.
Profit if assigned, then called away
+$670.00
Return on cash 14.0%
Profit if assigned, then called away
+$670.00
Return on cash 14.0%
- Cash tied up
- $4,800.00
- Premium for the cycle
- $270.00
- Cost per share after the put
- $46.50
- Cost per share after the call
- $45.30
- Return on cash for the cycle
- 14.0%
- Premium alone, annualized
- 36.7%
- Put expires worthless, annualized
- 40.7%
Annualized figures assume the same result repeats all year, which it will not if the stock falls well below the cost per share.
How the wheel strategy works
The wheel sells a cash-secured put, and if you are assigned the shares, it sells a covered call against them. If the shares are called away, you are back in cash and can start again. Each premium lowers your cost per share along the way.
The risk is a stock that falls well below your cost and stays there. You then hold shares at a loss, and any call you sell at a strike above your cost brings in little premium. This calculator shows the good path, a full cycle that ends with the shares called away, and the cost basis that tells you where the bad path starts to hurt.
Cost after put = put strike − put premium. Cost after call = cost after put − call premium. Profit if called = (call strike − put strike + both premiums) × 100 × contracts.
Worked example
Sell the $48 put for $1.50, get assigned, then sell the $52 call for $1.20. You tie up $4,800, the premiums bring in $270, and your cost falls to $46.50 and then to $45.30 a share.
If the shares are called away at $52, you make $400 on the shares plus the $270, for $670 or 13.96% on the cash. The premium alone over the 56 days annualizes to 36.7%, but only if every cycle repeats, and the stock could fall below $45.30 instead.
What the result does not account for
- The stock's price between steps. New strikes and premiums will depend on where it is at the time.
- Time spent holding the shares while waiting for a call to be exercised.
- Dividends collected on shares, taxes on assignment, commissions and early assignment.
Frequently asked questions
How much capital do I need for the wheel strategy?
You need the put strike times 100 for each contract. A $48 strike ties up $4,800, and a $200 strike ties up $20,000.
What happens if the stock crashes during the wheel?
You are assigned at the put strike and hold shares worth less than you paid. The premiums cushion only down to the cost per share shown here, and a call sold above that cost may bring in very little.
Related calculators
- Cash-Secured Put CalculatorSee the premium, the cash to set aside, the effective purchase price if assigned and the return on that cash.
- Covered Call CalculatorSee the premium income, adjusted cost, return if the shares are called away and return if the stock goes nowhere.
- Options Profit CalculatorBuild a trade of up to six legs and see its payoff chart, break-evens, maximum profit and loss, and how time decay changes the result before expiration.
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