Lesson 5 of 5

Completing the Wheel

The Full Cycle: Putting It All Together

When your covered call is assigned and your shares are called away, the wheel has completed one full rotation. You now have cash in your account (from the share sale plus all premiums collected) and no stock position. This is the moment to decide: do you start the wheel again on the same stock, or pick a new candidate?

A Complete Wheel Example on AMD

Full Wheel Cycle — AMD

Week 1: AMD at $145. Sell $140 put (30 DTE) for $2.80. Collected: $280. Week 5: AMD at $138. Assigned 100 shares at $140. Cost basis: $140 - $2.80 = $137.20. Week 6: AMD at $138. Sell $145 covered call (30 DTE) for $2.10. Collected: $210. Week 10: AMD at $147. Shares called away at $145. Total profit: ($145 - $137.20) x 100 + $210 = $780 + $210 = $990 over ~10 weeks on $14,000 capital. That is a 7.1% return in roughly 2.5 months, or about 34% annualized.

Tracking Your Wheel Performance

Track total premium collected per ticker across all cycles
Monitor your rolling cost basis: initial cost basis minus all premiums received
Calculate annualized return: (Total Return / Capital Deployed) x (365 / Days in Trade)
Log every trade — entry date, strike, DTE, premium, close date, and outcome
Compare your annualized returns against simply holding the stock (buy-and-hold benchmark)

When to Stop the Wheel

The wheel is not a 'set and forget' strategy. You should re-evaluate your stock selection regularly. There are several reasons to stop wheeling a particular stock:

The company's fundamentals have deteriorated (earnings miss, guidance cut, competitive threat)
Implied volatility has collapsed, making premiums too small to justify the capital commitment
The stock has run up significantly and you would no longer buy it at the current price
Your portfolio has become overconcentrated in one ticker
A better wheel candidate has emerged with superior risk/reward

Building a Wheel Portfolio

Advanced wheel traders often run 3-5 wheels simultaneously on different stocks across different sectors. This diversifies risk and ensures you always have positions generating income. For example: AAPL (tech), SOFI (fintech), AMD (semiconductors). Just make sure you have enough capital to be cash-secured on each position.

Remember: the wheel is a long-term income strategy, not a get-rich-quick scheme. Consistency matters more than any single trade. Even if you get assigned on a dip, the premium you have collected over many cycles acts as a significant cushion. Over time, this premium accumulation is what makes the wheel powerful.

Key Takeaways

•One complete wheel cycle = sell puts, get assigned, sell calls, shares called away.
•Track every trade and calculate your rolling cost basis and annualized return.
•Stop wheeling a stock if fundamentals change, IV collapses, or better candidates appear.
•Diversify across 3-5 tickers and sectors for a robust wheel portfolio.
•Consistency and premium accumulation over many cycles is the true edge.

Quick Check

1/3

After your covered call is assigned and shares are called away, what phase of the wheel do you return to?

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