Adjusted Cost Basis (ACB) is an essential metric for options wheel strategy traders. It represents the net cost of acquiring 100 shares of stock after deducting the premiums collected from selling cash-secured puts and covered calls, as well as any dividends received.
Unlike the standard cost basis reported by your broker (which is simply the assignment price), ACB allows traders to see their actual break-even point. This prevents them from accidentally selling a covered call at a strike price that locks in a mathematical loss.
To calculate ACB: start with the assignment price multiplied by 100 shares, then subtract every dollar of premium you have collected throughout the entire campaign — from the initial CSP through every subsequent covered call and any dividends received.
Tracking ACB correctly is what separates disciplined wheel traders from those who panic-sell at the wrong time or lock in hidden losses on covered calls.
Examples of Adjusted Cost Basis (ACB) in Action
- 1Selling a $150 strike put for $2.00 premium gives an initial ACB of $148 upon assignment.
- 2Selling a subsequent covered call for $1.00 premium reduces the ACB further to $147.
- 3Receiving a $0.50 dividend per share on 100 shares reduces ACB by another $0.50 to $146.50.
- 4After three covered call cycles at $1.00 each, a $150 assignment gives an ACB of $144 — the trader can sell a covered call at $145 and still profit.