The wheel, explained
Wheel vs covered calls
A covered call is one leg of the loop. Three differences separate how we run the wheel from the version usually taught.
A covered call strategy starts with shares you already own. The wheel starts earlier — it gets paid to acquire them, then sells calls, then sells them back. Covered calls are one step inside a longer loop.
Three things we do differently
- Assignment on purposeThe common version waits and hopes the put expires worthless. Taking the shares once a trade has moved is often better, because shares can be worked and a losing put cannot.
- Half size firstA full position at the open leaves nothing to respond with. Opening at half is what makes a second, lower entry possible rather than reckless.
- The covered strangleWhile holding shares, sell a call and another put at the same time. Two premiums working on one cost basis instead of one.
Lowering the basis is the whole game. Every rule above
exists to make that happen faster and more often.
What it looked like in practice
| Date | What the algo did | Result |
|---|---|---|
| Jul 21 | Assigned 100 shares | $120.77 basis |
| Jul 21 | Sold a $134 covered call against the shares | credit |
| Jul 23 | Sold a second put at $103 — the covered strangle | assigned at $114.87 |
| Jul 27 | Bought the $134 call back cheaper, sold the $120 | +$175 |
One position, all three rules, and a cost basis that fell from $120.77 to $111.55 while the trade was still open.
This is not theory.
The algo runs this every trading day and every fill is posted publicly — wins and losses, updated hourly, on a paper account.
See the live book Try it free for 30 daysThe wheel, lesson by lesson
01Name your price, get paid for itWhat a cash-secured put actually is — who pays you, why, and the two ways it ends.6:3102Getting paid to sellYou own the shares. Now the same trade runs the other way.6:4903How the cost comes downBasis: what the shares really cost after everything you have been paid.6:4004Paid from both sidesThe covered strangle: the trade that pays you twice while you wait.6:3405Picking the companyThe only rule in this series you cannot recover from getting wrong.6:3406Picking the priceWhere to agree to buy: below the floor, not above it.5:2207How much on one stockAbout a fifth of the account per stock, and start with half of it.3:5608Finishing the tradeCalled away is the good ending. The mistake is reaching for more.4:1709Put or call — the same tradeAt the same price they are the same bet. The difference is where the cash sits.in production
10How a machine runs itThe rules, unattended, against a public book.in production
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