Trading Strategies
What is Wheel Strategy?
A systematic approach cycling between cash-secured puts and covered calls.
📖 Complete Definition
The wheel strategy is an income-generating approach that cycles between selling cash-secured puts and covered calls. Start by selling puts on a stock you want to own. If assigned, sell covered calls on those shares. If shares are called away, start again with puts. This systematic approach generates consistent premium income.
💡 Examples
- →Sell $95 put, collect $2 premium. If assigned, sell $100 call for $1.50
- →Continue cycling to generate monthly income while potentially holding stock
❓ Frequently Asked Questions
What stocks are best for the wheel strategy?
Choose stocks you'd be happy to own with good options liquidity, reasonable IV for premium, and relatively stable price action. Many prefer ETFs like SPY or quality dividend stocks.
🔗 Related Terms
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