Every experienced wheel trader has been here. A stock you were confident about drops 25-30% after assignment. Your covered calls are collecting $0.15 when they used to bring in $3.00, because the calls are so far out of the money they're essentially worthless. Your unrealized loss is staring at you. You're wondering whether to cut and run or stay and fight.
Before you do anything: calculate your real ACB, not the number your broker shows. Then read through these five recovery strategies and make a decision based on math, not emotion.
Step 1: Know Your Actual Position Before You Make Any Moves
Pull up your campaign in OptionWheelTracker (or calculate manually if you're still on a spreadsheet) and find:
- Your true ACB after all premiums collected
- How far above or below your ACB the stock is currently trading
- How much total premium you've collected across the entire campaign
- Whether your fundamental thesis for the stock is still intact
This last point is critical. A temporary stock decline on a fundamentally solid company is a completely different situation from a company with deteriorating earnings, rising debt, or a broken business model. Use MoneySense.ai to check recent SEC filings before deciding which recovery path to take.
Recovery Strategy 1: Aggressive Covered Call Selling (The Patient Path)
If your thesis is intact and the stock decline looks like a temporary setback, the most sustainable recovery is to keep selling covered calls every 2-4 weeks at whatever strike is closest to or slightly above your current ACB. You won't get called away for a while, but the premiums compound and your break-even keeps dropping. This strategy requires patience — often 6-12 months — but it works cleanly without increasing your capital at risk.
Recovery Strategy 2: Sell Calls Below Your Assignment Strike
If your ACB is significantly below the current market price (because you collected a lot of premium before assignment), you have room to sell covered calls below the assignment strike while still protecting a net profit. You'd accept being called away at a "loss" relative to assignment price — but at a gain relative to your real ACB. This accelerates income collection at the cost of locking in a recovery exit price below where you originally sold the put.
Recovery Strategy 3: Dollar-Cost Average Into the Position
If you have strong conviction in the company's fundamentals, buying additional shares at the lower price immediately reduces your weighted average ACB and lets you sell more covered call contracts simultaneously. One caution: only do this with capital you had already earmarked for this campaign or a new campaign on the same ticker. Don't chase a losing position by over-allocating your portfolio to it.
Recovery Strategy 4: Tax-Loss Harvest and Reset
If you're approaching year-end and sitting on a meaningful unrealized loss, selling the shares to realize the capital loss can create a valuable tax deduction. After the 31-day wash sale window passes, you can re-enter the wheel at a fresh, lower strike price with a clean cost basis. This turns a paper loss into a real tax benefit while letting you restart the campaign at more favorable terms.
Recovery Strategy 5: Accept the Loss and Redeploy
Sometimes the best move is to calculate your time-to-recovery via covered call premium and face the honest answer. If recovering to your break-even through call premiums would take more than 12 months at current IV levels, that capital is almost certainly better deployed in a new campaign on a different stock. Holding a losing position out of psychological attachment isn't a strategy — it's just hoping the market comes back to bail you out.