Wheel Strategy Glossary
Plain-English definitions for terms you will see when learning the options Wheel. Skim what you need; skip the rest.
Assignment
Your broker buys (put) or sells (call) the shares for you because the option was exercised. In the Wheel, put assignment is an expected path, not automatically a mistake.
Breakeven (short put)
Strike minus net premium per share. Approximate purchase price if assigned.
Cash-secured put (CSP)
A short put with enough cash reserved to buy 100 shares per contract at the strike.
Covered call (CC)
A short call sold against 100 shares you already own (or are long). Caps upside at the strike while you keep the premium.
Cost basis / adjusted basis
What you effectively paid for shares after premiums. Example: assigned at $50 with $1.00 put premium → about $49 basis before fees.
Delta
Rough sensitivity of option price to a $1 move in the stock, and a rough proxy for finishing in-the-money. Short puts around 0.25–0.30 delta are a common Wheel starting zone.
DTE (days to expiration)
How many days remain until the option expires. Many Wheel traders look near 21–45 DTE for a balance of premium and time decay.
ITM / OTM / ATM
In-, out-, or at-the-money relative to the strike and stock price.
Premium
The price of the option, usually quoted per share; multiply by 100 for one contract (before fees).
Return on capital (ROC)
Net premium divided by capital tied up for the trade (for CSPs, usually strike × 100).
Annualized yield (comparison)
ROC scaled by 365 ÷ DTE so different-length trades can be compared. Not a guaranteed yearly return.
Rolling
Closing a short option and opening another (often further in time and/or different strike), usually for a net credit, to manage assignment or extend the trade.
The Wheel / Triple Income
The repeating cycle of CSPs → possible assignment → covered calls → shares called away → new CSP. See also the beginner guide.
Wheel strategy calculator
A tool that estimates capital, ROC, annualized comparison, and breakevens for put or call legs — such as the free calculator on this site.
Next reads: how the Wheel works, selling puts for income, comparing premiums, FAQ.
FAQ
What is the Wheel strategy in one sentence?
Sell cash-secured puts on a stock you are willing to own; if assigned, sell covered calls until the shares are called away; then start again.
Is the Wheel the same as the Triple Income strategy?
Many traders use Triple Income as another name for the Wheel: put premium, call premium, and possible share gains (dividends are sometimes called a fourth). Labels vary; the cycle is the same idea.
What delta do Wheel traders often use on puts?
A common starting range is about 0.25 to 0.30 delta for cash-secured puts — out of the money with meaningful premium. Delta is not a guarantee of outcome.
Educational only, not financial advice. Options involve risk.