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Wheel Strategy Calculator

Wheel strategy profit or loss equals final stock price minus put strike plus put premium plus call premium minus any short call obligation, times 100 shares times contracts.

Expiration scenarios

Solution

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Educational estimate only, not financial advice. Results exclude commissions, taxes, slippage, dividends, assignment risk, margin, and broker-specific rules. Verify before trading options.

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Wheel Strategy Formula

This models a cash-secured put assignment followed by a covered call at expiration.

Worked Examples

Load these examples to compare common wheel strategy payoff outcomes.

CALLED AWAY

What happens when the covered call finishes in the money?

The assigned shares rally above the call strike.

  • Add both premiums.
  • Cap the stock sale at the call strike.
  • Profit equals call strike minus put strike plus total premiums.

Result: the wheel cycle reaches its capped profit.

Actual assignment timing and taxes are not modeled.

How It Works

The wheel strategy sells a cash-secured put, accepts assignment if needed, then sells a covered call against the shares. This calculator models that assigned-stock cycle at expiration.

Example Problem

Sell a $50 put for $2, then sell a $55 covered call for $1.50 after assignment.

  1. Add the put and call premiums.
  2. Subtract both premiums from the assigned put strike to find adjusted basis.
  3. Cap upside above the covered call strike.
  4. Calculate final stock P/L plus premiums.

The calculator assumes assignment into shares and then a covered call cycle.

Key Concepts

Premiums lower basis, while the covered call caps upside after assignment.

Applications

  • Estimating assigned basis.
  • Comparing call strikes in a wheel cycle.
  • Sizing downside stock risk.

Common Mistakes

  • Ignoring assignment risk.
  • Assuming premium removes all downside risk.
  • Forgetting covered call upside is capped.

Frequently Asked Questions

What does the Wheel Strategy Calculator calculate?

It calculates expiration profit or loss, break-even levels, maximum profit or loss where they are defined, and payoff chart data from manually entered prices and premiums.

Does this calculator need live option quotes?

No. Enter the stock price, strikes, premiums, and contracts yourself. The calculator models expiration payoff from those inputs.

Does this model early assignment or changing implied volatility?

No. It is an expiration payoff calculator. It does not model commissions, fees, early assignment, exercise decisions, taxes, or mark-to-market pricing before expiration.

Why can payoff before expiration differ from this result?

Before expiration, option prices still include time value and implied volatility. This calculator focuses on intrinsic value at expiration.

Reference:

Options Industry Council strategy education and standard expiration payoff definitions.

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