Wheel Strategy ROI Calculator
Model a complete wheel cycle — CSP entry, assignment, covered call exit. See cumulative premiums, effective cost basis, total return, and annualized yield. The only calculator purpose-built for the wheel.
How the Wheel Strategy Works
The wheel strategy (sometimes called the “triple income strategy”) is a systematic approach to generating income from options by cycling between two positions: selling cash-secured puts and selling covered calls. It is designed for investors who are willing to own shares of the underlying stock and want to collect premium at every stage.
The cycle begins with selling a cash-secured put. You choose a stock you would be happy to own, pick a strike price at or below the current market price, and sell a put option. You receive a premium immediately. If the stock stays above the strike through expiration, the put expires worthless and you keep the premium — then you sell another put and repeat. This first phase can last one cycle or many, depending on whether the stock dips below your strike.
When the stock eventually drops below your put strike, you are assigned — you buy 100 shares at the strike price. But your effective cost basis is lower than the strike, because you've been collecting CSP premiums along the way. If you sold three rounds of puts at $3.50 each before assignment, your effective cost basis is already $10.50 per share below the strike.
With shares in hand, you transition to selling covered calls. You pick a strike at or above your cost basis and sell call options against your 100 shares. Again you collect premium. If the stock stays below the call strike, the option expires worthless and you repeat. Every expired call further reduces your effective cost basis.
Eventually the stock rises above your call strike and your shares are called away — you sell them at the strike price. The capital gain (call strike minus assignment price) adds to your total return. You pocket all the premiums collected from every CSP and CC cycle plus the capital gain. Then you start the wheel again.
The power of the wheel is compounding premium income. Each cycle, whether the options expire or get exercised, you are collecting income. The calculator above lets you model different scenarios: more CSP cycles before assignment, higher or lower premiums, different strike spreads. Use it to find combinations that meet your income and risk targets.
Example: Running the Wheel on AAPL
Let's walk through a realistic wheel cycle on Apple (AAPL) at $240.
Phase 1 — Cash-Secured Puts: You sell the $235 put for $3.50 with 30 DTE. This requires $23,500 in capital. If AAPL stays above $235, you keep $350 in premium (1.49% in 30 days). You do this three times before AAPL dips below $235 and you get assigned. Total CSP premium collected: $1,050 (3 × $350).
Assignment: You buy 100 shares at $235. But your effective cost basis is $235 − $10.50 = $224.50 per share, because of the three rounds of put premiums.
Phase 2 — Covered Calls: Now owning shares at a $224.50 effective cost basis, you sell the $245 call for $2.80 with 30 DTE. You do this twice before AAPL rallies past $245 and your shares are called away. Total CC premium: $560 (2 × $280).
Called Away: You sell 100 shares at $245. Capital gain: ($245 − $235) × 100 = $1,000.
Total results over 150 days:
- Total premium collected: $1,610 ($1,050 + $560)
- Capital gain: $1,000
- Total P&L: $2,610
- Return on $23,500 capital: 11.11%
- Annualized return: 27.0%
Try entering these numbers in the calculator above — you'll see this exact scenario modeled with the visual timeline.
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Frequently Asked Questions
What stocks are best for the wheel strategy?
Look for stocks you'd want to own long-term with sufficient options liquidity: tight bid-ask spreads, high open interest, and weekly/monthly expirations. Blue-chip stocks like AAPL, MSFT, and AMZN are popular, but many traders prefer moderately volatile stocks ($20-$100 range) where the premium-to-capital ratio is higher. Avoid meme stocks, biotech, and pre-earnings plays — the risk of a massive gap down outweighs the premium.
How do I choose the right strike price for the wheel?
Most wheel traders target around 0.25-0.35 delta for CSPs (roughly 65-75% probability of expiring OTM) and similar for covered calls. For CSPs, pick a strike at or below a price where you'd genuinely be happy buying the stock. For CCs, pick a strike at or above your cost basis so you lock in a profit if called away. The calculator above lets you experiment with different strike combinations to see how they affect your total return.
What happens if the stock drops significantly after assignment?
This is the main risk of the wheel. If the stock drops well below your put strike, you own shares at a loss. The premiums you collected provide a cushion (your effective cost basis is lower), but a major decline can still result in unrealized losses. Many traders manage this by (1) only wheeling stocks they believe in fundamentally, (2) keeping position sizes small (no more than 5-10% of portfolio per position), and (3) being patient — continuing to sell covered calls at or above cost basis while waiting for recovery.
How much capital do I need to run the wheel?
You need enough cash to buy 100 shares at the put strike price. For a $50 stock, that's $5,000. For a $200 stock, that's $20,000. Some brokerages allow the wheel on margin, reducing the capital requirement, but this adds leverage risk. Many traders start with lower-priced stocks ($15-$50) to learn the mechanics before scaling up.
Options involve risk and are not suitable for all investors. All calculations are estimates — actual results will vary. Not financial advice. Full disclosure