The concept
How the wheel turns premium into repeatable income
The wheel strategy repeats a two-step cycle: sell a cash-secured put below the current price, and if the price falls and the put is assigned, you now own the shares — so you switch to selling a covered call above your cost, and if that call is assigned, you're back to cash and start again with another put.
Each leg collects premium up front, which is the strategy's income. But the wheel does not eliminate stock risk: if the underlying falls significantly after you're assigned via the put, you hold a losing stock position whose paper loss can exceed everything collected in premium, and the covered call leg caps your upside if the stock rallies past the call strike.
The method
How the calculation works
Cash required is the put strike multiplied by 100 shares per contract and the number of contracts, reflecting the capital needed to cover assignment on the cash-secured put. Premium per cycle sums the put and call premiums, multiplied by 100 and contracts. Annual income multiplies that per-cycle premium by the estimated number of cycles per year, and return on capital divides annual income by the cash required.
Cash required is based on the put strike, since a cash-secured put obligates you to buy 100 shares per contract at that strike if assigned.
Worked example
A neutral example
For a $95 put strike with $2 premium, a $105 call strike with $2 premium, 1 contract, and roughly 6 cycles a year, the calculator estimates total annual premium income and the return on the capital required to secure the put.
This example explains the method. It does not recommend a financial action or predict an outcome.
Frequently asked
Wheel Strategy Calculator questions
Does the wheel strategy guarantee income?+
No. Premium collected is real, but it doesn't offset an unlimited downside if the underlying stock declines sharply after you're assigned shares via the put — the stock position can lose more than all the premium collected. The wheel converts option selling into a stock-ownership strategy, not a risk-free income stream.
What happens if the stock never gets assigned?+
If the cash-secured put expires worthless (price stays above the strike), you keep the premium and can sell another put — you never own the shares in that cycle. This calculator assumes premium is collected each cycle regardless of assignment, which is the typical case for either leg.
How many cycles per year is realistic?+
It depends on the expiration cycle you choose for the puts and calls (weekly, monthly, etc.) and how often you're actually assigned versus letting options expire and rolling to a new cycle. Six cycles a year (roughly bi-monthly) is a common illustrative assumption, but adjust it to match your actual trading cadence.