Wheel strategy calculator
The wheel is one loop: sell a cash-secured put, get assigned, sell covered calls against the shares, get called away, start again. This calculator runs a full cycle and returns your adjusted cost basis at each step plus the total return on the capital the cycle tied up.
Cost basis is the number that runs the strategy
Everything in the wheel hangs off one figure: what the shares effectively cost you after the put premium. Sell the 170 put for 2.15 and get assigned, and your basis is 167.85, not 170. That 2.15 is the difference between being allowed to sell the 170 call and being stuck.
Then every call premium you collect drops the basis further. Two months of 1.90 calls and your basis is 164.05. This is the mechanism that makes the wheel work when the stock chops sideways, and it is also the mechanism that fails you when the stock drops 25% and no call above your basis pays anything worth having.
The rule that saves the strategy
Never sell a call below your cost basis. The calculator flags it, in red, because it is the single most common way a wheel turns into a slow bleed. You get assigned at 170, the stock falls to 152, and the 155 call pays 2.40 while the 170 call pays 0.15. Selling the 155 feels like income. It is a decision to realize a 12.85 per share loss for 2.40, and you will make it again next month.
What to do instead is unglamorous. Hold the shares. Sell nothing, or sell so far out that the premium is thin but the strike is above your basis. Wait. The wheel has a stall state and the strategy only works if you are willing to sit in it.
A worked example
One clean cycle on a 170 dollar stock, 1 contract:
- Sell the 170 put, 45 days, collect 215. Assigned at expiration.
- Cost basis after assignment: 167.85.
- Sell the 175 call, 38 days, collect 190. Called away.
- Share gain: 500 dollars, from 170 up to 175.
- Cycle total: 905 dollars on 17,000 of capital over 83 days. That is 5.32%, roughly 23% annualized.
Real cycles do not look like that. Half of them the put expires worthless and you never own the shares, which is a fine outcome that pays less. Some of them you hold the stock for seven months. The annualized figure above is what a clean loop pays, not what a year pays.
Questions people actually ask
How much capital does one wheel need?
Strike times 100 per contract, held in cash for as long as the cycle runs. On a 170 dollar stock that is 17,000 dollars committed to one ticker. Under about 25,000 dollars the wheel realistically works on one or two names, which is a concentration problem the strategy does not solve on its own.
What if I never get assigned?
That is the good case and it is the common one. At a 0.20 delta strike the put expires worthless most of the time, you keep the premium, and you sell another. The wheel spends more of its life in the put stage than anywhere else.
Should I wheel a stock I would not own?
No, and this is the filter that matters more than any yield screen. The wheel hands you 100 shares at the worst possible moment, right after the stock dropped. If your answer to owning it then is no, the premium was never enough.
Does the calculator handle a stalled wheel?
Not directly. It models a clean loop. To see a stall, set the call strike above your basis and the call premium to something small, and look at what the annualized number does. That is the case worth modelling before you start, not after.