Wheel Strategy Calculator
Run the numbers on the wheel: sell a cash-secured put for income, and if you are assigned, sell covered calls against the shares until they are called away. This tool sizes each leg and shows the annualized yield so you can compare trades of different lengths. Use the tabs to switch between the put and the call leg.
How it works
The wheel is a two-step income loop. Step 1: sell a cash-secured put on a stock you would be happy to own, holding enough cash to buy 100 shares per contract if assigned. You keep the premium; your effective purchase price is the strike minus that premium. Step 2: if the put is assigned, you own the shares, so you sell covered calls against them, collecting more premium until the stock is called away above your basis. Then you start again.
What income traders actually compare is the annualized return on the capital at risk, because a 3% premium over 30 days is very different from 3% over 90 days. The calculator annualizes each leg on a simple 365-day basis. It is the same exact engine as the covered-call and cash-secured-put calculator, framed as the wheel cycle.
Worked example
Step 1, the put. Sell the $50 put for $1.50, 30 days out, one contract:
- Cash secured = 50 × 100 = $5,000; premium income = $150.
- Premium yield = 1.50 / 50 = 3.0% → annualized 3% × 365/30 = 36.5%.
- Effective buy price if assigned = 50 − 1.50 = $48.50 (your breakeven).
Step 2, if assigned. Switch to the Covered Call tab with a cost basis of $48.50 and sell, say, the $52 call for $1.20 over 30 days: that is another 1.20 / 48.50 = 2.5% (≈30% annualized), and if called away you also bank the gain from $48.50 to $52. Keep wheeling and the leg yields stack while the cycle repeats.
The formula
Step 1 — cash-secured put (entry): premium yield = premium / strike effective price = strike − premium (your breakeven if assigned) annualized = premium yield × 365 / days Step 2 — covered call (after assignment): static return = premium / cost_basis if-called return= (strike − cost_basis + premium) / cost_basis annualized = period return × 365 / days
Annualized figures are simple (×365/days), not compounded, so they are comparable across trade lengths but not a guaranteed yearly return.
FAQ
- What is the wheel strategy?
- Selling cash-secured puts on a stock you would own, then selling covered calls if you are assigned, repeating the cycle to collect premium on both sides.
- How is the wheel's annualized return calculated?
- Each leg's period return (premium ÷ capital at risk) is scaled by 365 ÷ days. The put leg uses the strike as capital; the call leg uses your cost basis.
- What happens when my cash-secured put is assigned?
- You buy 100 shares per contract at the strike, but your effective cost is the strike minus the premium you collected. You then sell covered calls against them.
- Is the wheel safe in a downturn?
- No. The premium gives only a small buffer; if the stock falls well below your effective basis you hold a loss, just as if you had bought the shares outright. The wheel is an income strategy, not downside protection.