If you've been running the wheel strategy for more than a few weeks, you've probably noticed something frustrating: your broker shows one cost basis, and your gut tells you the real number is lower. You're right. The number your broker shows is almost always wrong for wheel traders — and the gap between the two can be thousands of dollars.
Adjusted Cost Basis (ACB) is your true cost of owning shares after you subtract every dollar of premium you've earned along the way. It's the number that tells you whether you're actually profitable — not the number your broker reports.
What Is the ACB Formula for the Wheel Strategy?
The formula itself is simple. What makes it tricky is knowing every input that belongs in it:
ACB per Share = (Total Share Cost − Total Net Premiums Collected) ÷ Shares Held
Let's break each piece down so there's no guesswork.
What Goes Into "Total Share Cost"?
This is the gross amount you paid for your shares at assignment. If you were assigned on a $170 strike put, your total share cost is $170 × 100 = $17,000. If you've been assigned multiple times across different strikes, add them together. Simple.
What Goes Into "Total Net Premiums Collected"?
This is where most traders either miss something or include the wrong thing. Net premiums include every option trade in your campaign, but calculated after fees:
- Cash-secured put premiums received (positive — reduces ACB)
- Buy-to-close costs on puts you closed early (negative — increases ACB)
- Covered call premiums received (positive — reduces ACB)
- Buy-to-close costs on calls you managed early (negative — increases ACB)
- Net roll credits or debits (net of close + open legs)
- Dividends received (positive — reduces ACB for performance purposes)
Always use net premium after fees. If you received $2.50 in premium and paid $0.65 in commissions, your net is $2.50 × 100 − $0.65 = $249.35. Use that number, not $250.
Real Example: Full AAPL Wheel Campaign
Let's run through a complete, realistic example so you can see exactly how ACB changes at each step:
| Trade | Type | Net Amount | Running ACB |
|---|---|---|---|
| Week 1 | Sell $170 CSP | +$250 | — |
| Week 2 | CSP expires worthless | $0 | — |
| Week 3 | Sell $170 CSP | +$280 | — |
| Week 4 | Assigned at $170 | −$17,000 | $164.70 |
| Week 5 | Sell $175 CC | +$320 | $161.50 |
| Week 6 | CC expires worthless | $0 | $161.50 |
| Week 7 | Sell $175 CC | +$290 | $158.60 |
| Week 8 | Called away at $175 | +$17,500 | Campaign closed |
Total campaign profit: Shares sold at $175 with an ACB of $158.60 = $16.40 per share × 100 = $1,640 on shares alone. Add $1,140 in net premiums = $2,780 total profit on $17,000 of capital deployed. That's a 16.4% return in 8 weeks — and your broker only sees part of it.
Why Does Your Broker Show the Wrong Number?
Your broker records $170 as your cost basis because that's the price you paid at assignment. It has no mechanism to connect the $530 in put premiums you collected before you owned the shares. Those are recorded as separate, closed option trades. The broker doesn't link them to the stock position — it can't. You have to do that yourself.
This is the core reason why every serious wheel trader needs a dedicated tracking tool. Brokers are built for transaction recording. You need campaign-level accounting.
What Are the Most Common ACB Calculation Mistakes?
- Using gross premiums instead of net: Every fee counts. Small commissions add up over dozens of trades and inflate your apparent profitability.
- Counting both legs of a roll separately as full premiums: A roll is one close and one open. The net credit or debit is what counts — not the full premium on each leg.
- Mishandling partial assignments: If 2 of your 5 contracts get assigned, only 2/5 of cumulative premiums reduce your assignment cost basis. The rest stays as realized income on the expired contracts.
- Ignoring currency conversion: If you're trading US stocks from outside the US, your ACB needs to reflect your home currency. A flat CAD-to-USD conversion on the day of assignment can cause large discrepancies over a multi-month campaign.
How Do You Automate ACB Tracking?
Manually calculating ACB works fine for a handful of trades. After 15 or 20 trades — especially if you're rolling positions — formula errors start compounding and things get messy fast. OptionWheelTracker recalculates your ACB automatically after every trade entry, handling premiums, fees, rolls, partial assignments, and currency conversions without any manual formulas on your end.
Research the Stock Before You Wheel It
Before opening any campaign, it pays to understand what you're buying into. Use MoneySense.ai for AI-powered analysis of recent SEC filings, earnings reports, and news sentiment. A strong fundamental case is the foundation every good wheel campaign is built on.