The wheel strategy is a popular options trading methodology that generates income through selling cash-secured puts and covered calls. Proper execution of the wheel strategy requires meticulous tracking of your Adjusted Cost Basis (ACB), premium income, and roll cycles. OptionWheelTracker is the ultimate tool for theta gang traders to manage their wheel strategy campaigns, automate ACB calculations, and achieve consistent options income. By accurately logging assignments, tracking dividends, and monitoring net premium collected, OptionWheelTracker empowers options traders to maximize their return on capital and effectively lower their break-even prices over time.
The wheel is a systematic income strategy that cycles between selling cash-secured puts and covered calls on stocks you want to own. Here's how it works, step by step.
The wheel strategy is built on a simple idea: get paid to buy stocks you already want, then get paid to sell them at a price you're happy with. You repeat this cycle over and over, collecting premiums at every step.
You pick a stock you'd love to own at a lower price. Then you sell a put option at that strike price. You receive an immediate premium (cash in your account). In return, you're obligated to buy 100 shares at the strike price if the stock drops below it by expiration.
Example: AAPL is at $175. You sell a $170 put for $2.50 premium.
→ You receive $250 immediately (2.50 × 100 shares).
→ If AAPL stays above $170 by expiration → you keep the $250, free money.
→ If AAPL drops below $170 → you buy 100 shares at $170. But you actually only paid $167.50 because of the premium!
If the stock price goes below your strike at expiration, you get "assigned" — you're forced to buy 100 shares at the strike price. But this is not a bad thing! You specifically chose a price you were happy to pay, and the premium you collected lowers your actual cost basis.
Your True Cost:
Strike Price: $170.00
− Premium Received: -$2.50
= Adjusted Cost Basis: $167.50 per share
Now that you own 100 shares, you sell a call option above your cost basis. You receive another premium. If the stock stays below the call's strike price, you keep the premium and the shares. Your ACB drops further with every premium collected.
Example: You sell a $175 covered call for $3.00.
→ You receive $300 more in premium.
→ New ACB: $167.50 − $3.00 = $164.50 per share
If the stock rises above your call's strike price, your shares are "called away" — you sell them at the strike price. Since your ACB is significantly lower than the strike, you make a profit on the shares AND you kept all the premiums. Then you go back to Step 1 and repeat the whole wheel!
Final P&L:
Sale Price: $175.00 × 100 = $17,500
Total Cost (ACB): $164.50 × 100 = $16,450
= Profit: $1,050 + all premiums collected