Cost Basis Tracker
Track how each round of premium income reduces your effective cost basis. Add CSP and covered call premiums as you collect them and see your breakeven drop in real time.
How Cost Basis Tracking Works for the Wheel
Every time you sell a cash-secured put or covered call and collect a premium, your effective cost basis on the underlying shares decreases. This is one of the most powerful mechanics of the wheel strategy — even if the stock price hasn't moved, your breakeven keeps dropping with each options cycle.
For example, if you purchase 100 shares at $50.00 and then collect $1.20 per share from a CSP round plus $0.85 per share from a covered call, your effective cost basis drops from $50.00 to $47.95 — a 4.10% reduction. That means the stock can fall to $47.95 before you're at a loss on the position.
Why Track It?
Tracking your cost basis over time helps you make better decisions about strike selection, position management, and when to exit a wheel cycle. Key benefits include:
- Strike selection: Always know your breakeven so you can sell covered calls above it, locking in profits if called away.
- Risk management: See exactly how much downside protection your collected premiums provide.
- Performance tracking: Measure the cumulative impact of your options income strategy over multiple rounds.
- Tax planning: Your adjusted cost basis is important for calculating capital gains when shares are eventually sold.
How to Use This Calculator
Enter your original purchase price and number of shares. Then add each premium you've collected as a separate entry — label it (e.g. “CSP Round 1”, “CC Round 2”) and enter the premium per share. The calculator automatically shows your running effective cost basis, total premium income, percentage reduction, and how your current stock price compares to your breakeven. Add entries as you complete each options cycle to keep a running record.
Key Formulas
Effective Cost Basis = Purchase Price − Total Premiums Collected
% Reduction = Total Premiums / Purchase Price × 100
Breakeven = Effective Cost Basis (stock must stay above this)
Total Premium Income = Σ (Premium per Share × Number of Shares)
Frequently Asked Questions
What is effective cost basis?
Effective cost basis is your original purchase price minus all option premiums collected. If you bought shares at $50 and collected $3.00 in total premiums from CSPs and covered calls, your effective cost basis is $47.00. This is the price the stock needs to stay above for you to be profitable.
How do CSP premiums reduce cost basis?
When you sell cash-secured puts before owning shares, the premiums collected reduce the effective price you pay if eventually assigned. Three rounds of $1.00/share CSP premiums means your effective purchase price is $3.00 less than the strike where you're assigned.
Should I sell covered calls below my cost basis?
Generally no. Selling covered calls below your cost basis means you'd lock in a loss if the shares are called away. Most wheel traders sell calls at or above their effective cost basis to ensure a profit on assignment. The exception is when you want to exit a losing position and are willing to accept a partial loss.
Does cost basis reduction affect taxes?
Yes. Option premiums you collect affect your tax basis. Short option premiums are generally treated as short-term capital gains when the option expires or is closed. If shares are assigned or called away, the premium adjusts the cost basis of the shares for tax purposes. Consult a tax professional for your specific situation.
How many premium rounds does it take to meaningfully reduce cost basis?
It depends on the premium size relative to the stock price. On a $50 stock collecting $1.00-$1.50 per round, 3-5 rounds can reduce your cost basis by 6-15%. On higher-priced stocks where premiums are proportionally smaller, it may take more cycles. The tracker helps you visualize this cumulative progress.
Options involve risk and are not suitable for all investors. All calculations are estimates — actual results will vary. Not financial advice. Full disclosure