Wheel strategy (options) explained

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The Wheel is a cycle that combines a cash-secured put and a covered call:

1. Sell a cash-secured put on a stock you are willing to own. Collect premium. Repeat until you are assigned (you buy 100 shares at the put strike).
2. Sell a covered call against those shares. Collect premium. Repeat until the shares are called away (sold at the call strike).
3. Start again with cash-secured puts — or stop if the stock no longer fits your plan.

Why people use it

• Rules-based way to collect premium while aiming to own stocks they already like
• Turns “wait to buy” (puts) and “willing to sell higher” (calls) into a cycle

Risks beginners underestimate

• Assignment buys shares that can keep falling — premium does not remove stock risk
• Covered calls cap upside in a strong rally
• You need capital for 100 shares (or cash to secure puts)
• Not a passive “set and forget” income machine

Practice CSP in Builder → Practice Covered Call → Advanced page (Wheel visual & more)

Beginner FAQ

What is the options wheel strategy?
The Wheel cycles a cash-secured put and a covered call: collect premium while waiting to buy shares you accept, then collect premium while holding them, then restart after shares are sold.

Does the Wheel remove stock risk?
No. Premium does not cancel a falling stock. Assignment means you own shares that can keep dropping.

Who is the Wheel for?
People willing to own 100-share lots of a name they already like, with cash or shares to support the cycle. It is not passive income.

Next: Print the options cheat sheet or open this setup in the Builder.