Once you've been running the wheel strategy for a while, you'll likely come across the covered strangle — selling both a covered call on your existing shares and a new cash-secured put below the current price at the same time. The appeal is obvious: you're collecting premium from both sides simultaneously. The tracking challenge is significant: you now have two open positions feeding into one campaign's cost basis, and most tracking setups can't handle it cleanly.
What Is a Covered Strangle in the Wheel Strategy?
A covered strangle is when you're already holding shares (from a previous assignment), you sell a covered call above the current price as usual — but you simultaneously sell a new cash-secured put below the current price, using separate cash as collateral. The result: you're collecting both call premium (on your existing shares) and put premium (on a potential new lot of shares) from a single underlying position.
Should You Track the Strangle as One Trade or Two?
Track it as two separate trades within the same campaign. Here's why this is the right approach:
- Both legs can have completely different outcomes — the call can expire worthless while the put gets assigned, or vice versa
- Each leg has its own expiration, premium, and strike that needs to be tracked independently for tax purposes
- If the put gets assigned, you'll have a second lot of shares at a different cost basis that merges into the same campaign
By logging the covered call as a standard CC trade and the new CSP as a standard CSP trade — both linked to the same campaign — both premiums naturally reduce the campaign's overall ACB without creating accounting conflicts.
What Happens to Your ACB If Both Sides Get Tested?
Worst case: you get assigned on the new put at the lower strike while your original shares sit below the call strike (but not called away). You now own two lots of shares at different cost bases. Your campaign ACB becomes a weighted average of both lots, minus all collected premiums from both sides of the strangle. OptionWheelTracker handles this natively — both trade entries automatically update one campaign ACB, even across multiple assignment events at different strikes.
When Is the Covered Strangle Worth the Complexity?
The covered strangle works best when IV is elevated across both sides (making premiums attractive), you have genuine conviction in the stock and would be comfortable owning a second lot at a lower price, and you have sufficient cash reserves to cover the new CSP assignment without straining your overall portfolio. If any of those conditions aren't clearly met, the simpler covered-call-only approach is usually the better choice until they are.