The wheel strategy
1In one sentence
The wheel repeats two steps: sell a put to get paid while waiting to buy a stock lower, and if you end up owning it, sell covered calls on it.
Step 1 is a cash-secured put: you keep enough cash to buy the 100 shares if the put is assigned. Step 2 is the covered call from the previous lesson.
2Try it: step 1, sell a put
Example: NVDA is $215. You sell the $200 put for $4 a share, collect $400, and set aside $20,000 in case you have to buy the shares.
33 words to know
Cash-secured put$20,000 set aside
You sell a put and keep cash to buy the 100 shares at the strike if you have to.
Assignmentyou buy at $200
If the stock ends below the strike, you buy the shares at the strike. With the $400, your cost is $196 a share.
Covered callstep 2
Once you own the shares, sell calls above your cost to collect more premium (lesson 5).
4Watch out
- The stock can keep falling. If you're assigned at $200 and NVDA drops to $150, the premium barely helps.
- It ties up a lot of cash. One contract needs enough cash for 100 shares at the strike.
- Gains are capped. In both steps, the most you make is the premium (plus some share gains in step 2).
5Quick check · 3 questions · optional
Now try it for real
See what the Co-Pilot says today about NVDA, TSLA and 8 more stocks, then drag the dot on a real price.
Common questions
What is the wheel strategy in options?
The wheel is selling cash-secured puts on a stock you'd be happy to own; if assigned, you buy the shares and then sell covered calls on them, collecting premium at each step.
How much money do you need for the wheel?
Enough cash to buy 100 shares at the put's strike, for each contract. A $200 strike needs $20,000.
What is the risk of the wheel strategy?
The stock can fall far below your strike, leaving you with shares worth much less than you paid. The premiums only cushion that a little.
Education only. Examples use illustrative numbers. Not financial advice; you make your own decisions.