[lewdog]

Wheel Strategy Article that I found helpful. I have sold puts and covered calls in similar but not exact fashion. I like the theory behind this technique and I may run with it for value stocks I may like owning anyway.

The Wheel Strategy is a systematic and very powerful way to sell covered calls as part of a long-term trading strategy.

The process starts with a selling a cash secured put. The investor also needs to be willing, and have the funds available to purchase 200 shares.

After selling the initial put, the put either expires or is assigned. If it expires, they keep the premium and start again if they are still bullish on the stock, or they move on to another stock. If they are assigned, they take ownership of 100 shares.


At this point they sell a call to turn it into a covered call and they also sell a new put.

From here, if the stock goes up through your call, you are assigned and the stock is called away leaving you flat. As the stock went up, your sold put expires worthless.

If the stock goes down, you are assigned on the second put, and you now have your full allocation of 200 shares. As the stock went down, the call expires worthless.

Now that you own 200 shares, you sell two calls.

If the stock goes up through the calls, the stock is called away and your position is flat again.

Through the process you have collected 5 option premiums, plus any dividends while holding the shares, plus potentially some capital gains, depending at which strikes you sold the calls and puts.

If the stock continues down, you can continue to sell 2 covered calls each month.

This process is best explained in the following diagram:

https://optionstradingiq.com/the-wheel-strategy/