The wheel
Sell cash-secured puts until assigned, then sell covered calls on the shares.
Bullish1 legCredit
Illustrative: underlying at 100, strikes every 2.5, 45 days to expiry, implied volatility 25%, model prices. One lot = 100 shares.
Key figures
| Opens for | a credit of $214 |
|---|---|
| Max profit | +$214 |
| Max loss | −$9,536 if the shares went to zero |
| Break-even | 95.36 |
| Position delta today | +35 shares |
| Outlook | Bullish |
The legs
| Action | Quantity | Option | Model price |
|---|---|---|---|
| Sell | 1 | 97.5 put, 45 days | 2.14 |
How it works
Sell cash-secured puts until assigned, then sell covered calls on the shares. Single options are the building blocks: the right to buy (a call) or to sell (a put) 100 shares at a fixed price, the strike, until expiry. Combined with shares, they add income or protection to a holding.
When it fits
It suits a view that the underlying holds up or rises before expiry.
What can go wrong
The loss grows as the price falls, to −$9,536 in this example if the shares went to zero. Short options can be assigned early, and a sharp fall with implied volatility rising can hurt more than the expiry line suggests, which is what the crash band shows.
Building it in Trident
In the Strategy Lab, choose the wheel and the days to expiry. Trident applies these strike rules to your live chain, prices each leg and draws the trade on the risk graph, where you can drag the days to expiry, change implied volatility or switch on the crash band. When it looks right, send it to order management; nothing reaches your broker until you send it.
Frequently asked questions
What is a the wheel?
Sell cash-secured puts until assigned, then sell covered calls on the shares.
What is the maximum loss on a the wheel?
In this illustrative example it is −$9,536 for one lot at expiry.
Where does a the wheel break even?
With the underlying at 100 in this illustrative example, the break-even at expiry is 95.36.
Can I build a the wheel in Trident?
Yes. Pick it in the Strategy Lab and Trident chooses the strikes from your live chain, prices the legs and draws it on the risk graph.
Illustrative example with model prices, not a recommendation. Options carry risk of loss. See the risk disclosure.