How to Make Money with the Wheel Options Strategy: Lessons from 300+ Trades

The Wheel Strategy has been one of my favorite tools for generating consistent options income. It’s been a while since I first wrote about it, but after completing hundreds of Wheel trades this year, including the insane March drop and following bounce back to infinity and beyond.

I’ve got some fresh thoughts on what works, what doesn’t, and how to maximize this strategy. Whether you’re a seasoned options seller or just exploring passive income strategies, we’re going to break down how Wheel works, understand the good, the bad, and the ugly, and learn how to get paid.

What is the Wheel Strategy in Options Selling?

The Wheel Strategy is an options-selling strategy designed to generate steady income on stocks you are generally interested in owning. Here’s the simplified process:

1. Sell Cash-Secured Puts (CSPs): Choose a stock you want to own, sell a put at a strike price you’re comfortable buying it for, and collect that cash money.

   
   

2. Get Assigned Shares: If the option expires in-the-money (ITM), you’ll own 100 shares per contract at the strike price which is a good thing since we know you already like the stock!

   
   

3. Sell Covered Calls (CCs): Once you own the shares, sell covered calls against them to generate more cash money. Ideally you sell these above your cost basis to guarantee profit either way!

   
   

4. Repeat the Cycle: When your shares are called away, start the process over with CSPs… hence it being a wheel.

Important: we aren’t doing this with naked calls or puts, we always have the collateral (shares for CCs, cash for CSPs) backing our positions which is what makes the risk quite low.

The only risk is the underlying dropping significantly, which is really only an issue when you do this with stocks you don’t like or don’t really want to own.

Why Use the Wheel Strategy to Build Wealth?

Pros of the Wheel to Generate Selling Options Income:

Consistent Income: You can earn anywhere from 0.5% to 10% per trade depending on the stock’s volatility, weekly which translates to 25%-500% annualized returns. Our members tend to average right around 3% weekly. Of course, the higher the volatility the higher the risk of the underlying driving you nuts.

Downside Protection: Selling puts provides a buffer against immediate losses and lowers your cost basis by way of getting paid to enter a position below what you would have, had you just bought the stock outright.

Flexibility: You can buy back options early, roll positions, or adjust strikes based on market changes which if you didn’t know, happens CONSTANTLY!

Profit Locked at Entry: You collect premium upfront so you literally choose how much money you want to make. Shares getting called away means MAX PROFIT!!

Set it & (Wait for The Crowd) Forget it!!: You’ve seen the infomercial I’m sure, but this is the lazy way to invest. Depending on your personal style, this could be a couple of times a week, or a couple of times a month. You’re in control.

Cons of using the Wheel as a Stock Options Strategy:

Capital Intensive: You can’t do this without some existing base of capital. Whether that’s shares of a stock or cash to sell puts, you need something to sell something.

Capped Upside: Selling covered calls limits profit potential in sharp rallies, which can especially be noticed around big catalyst events like earnings. 

Less Excitement: If you thrive on high-risk, lotto-style trades, this won’t scratch that itch, usually. Of course if you play high volatility stocks, you can still get a little bit of that.

7 Things I’ve Learned After 300+ Trades using the Wheel

The best way to learn is by doing and I’ve done a lot this year:

1. Stick to Your Rules: My 5 Golden Rules (below) really are great guidelines to stick to. Every time I have missed out on profit was because I broke one of these rules.

   
   

2. Why go all in? You don’t have to fully cover your entire position. Sometimes it’s best to just let some of your shares stay uncovered, especially if you think there is a potential for the stock to breakout due to an upcoming catalyst.

   
   

3. Don’t Marry Your Loses: what we care about is generating income. If you aren’t cutting bad trades to avoid booking a loss, that cash isn’t working for you. It’s fine to give something time to recover but if you know a position is dead, move on.

   
   

4. Take Profit Early: If you can buy back a contract at 50–80% profit, do it. Often, we can buy back and resell the same exact contract a day or two later. No reason not to lock profit in when it’s there staring you in the face.

   
   

5. Use ITM Puts for Protection: ITM CSPs can be a smart way to enter a position with downside cushion as well as offering higher return for positions you are bullish on.

   
   

6. Understand Early Assignment Risk: Covered calls can be assigned before expiration and that can suck if you’re not expecting it. Ask me how I know.

   
   

7. This Is Not Day Trading: The Wheel isn’t for quick flips even though that sometimes happens. It’s all about 

   
   

Rise’s 5 Golden Rules of Wheeling for Greater Market Success

1. Sell options on stocks you’re happy to own.

2. Never panic, especially after hours. Panic leads to bad choices.

3. Be patient, stocks don’t only move in one direction.

4. Don’t overextend, max trade size 10%, max position size 20%.

5. Always take profit: aim for >50% profit before 50% of the contract’s elapsed time and turbo charge your wheel!

Final Thoughts: The Wheel as a Tool

At its core, the Wheel is a tool and not some magic bullet. It’s a disciplined way to generate income and build positions, but it really shines when combined with other strategies and a little bit of Technical Analysis.

We really don’t care about perfectly timing things here, we’re just looking to be directionally correct. And even if we aren’t directionally correct, we’re more protected than most out there since we are continually driving our cost basis down for our positions.

Ready to Learn More?

Join a community of income-focused traders in the Theta Daddies Discord where we share what we’re trading and why, weekly watchlists, and real-time strategy discussions.