In the wheel strategy, you do not always have to hold a position until expiration. There are several situations where closing early makes strategic sense:
- 50% Profit Rule: Many wheel traders close positions after collecting 50% of the original premium. A put sold for $2.00 is closed when it reaches $1.00. This "banks" profit while freeing up capital for the next trade and reduces gamma risk.
- Before Earnings: If an earnings announcement is scheduled within your expiration window, some traders close before the event to avoid binary risk — even at a smaller profit.
- Rising IV (Selling Premium into Low IV): If IV spikes unexpectedly, your short option becomes more expensive. Some traders close and re-sell at a higher premium after the spike.
- Stock Approaching Strike (21 DTE): If the stock is near your strike with 2-3 weeks to go, closing early and rolling to a better position may be preferable to waiting for assignment or expiration.
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