Wheel Strategy Calculator
Estimate one wheel cycle: cash-secured put premium, covered call premium, dividends, and the return on capital if assigned and called away, for the prices you enter.
The wheel strategy sells a cash-secured put to collect premium, and if the put is assigned, sells covered calls against the shares while collecting any dividends. This calculator estimates one full cycle for the prices you enter: the premium and dividend income, the share gain if called away, the total profit, and the return on the cash you put at risk, annualized by how long you held it. It is a scenario, not a forecast.
Total profit this cycle
$900.00
Premium plus dividends plus the share gain if assigned and called away, for the entered prices.
- Premium income
- $400.00
- Dividend income
- $0.00
- Share gain if called away
- $500.00
- Capital at risk
- $10,000.00
- Cost basis if assigned
- $98.00
- Break-even price
- $96.00
- Return on capital (this cycle)
- 9.00%
- Annualized return (scenario)
- 54.75%
- Annualized return, premium only (scenario)
- 24.33%
Assumptions
- This is a SCENARIO for the exact prices you enter for one wheel cycle, NOT a prediction or an expected return. It assumes the cycle completes as a wheel: you sell a cash-secured put, the put is assigned so you buy 100 shares per contract at the strike, you sell a covered call, collect any dividends, and the shares are called away at the call strike. Different outcomes (the put expires worthless, the call expires worthless and you keep the shares, or the stock falls) produce different results.
- Capital at risk is the cash that secures the put: the put strike times 100 per contract. Premium income is the put premium plus the call premium, times 100. The share gain if called away is the call strike minus the put strike, times 100, which is negative if the call strike is below the put strike. Total profit is premium plus dividends plus that share gain.
- Return on capital is total profit divided by the capital at risk for this one cycle. The annualized figures scale that return to a year by multiplying by 365 divided by the days held. Annualizing a single cycle assumes you could repeat an identical cycle all year, which is rarely true, so read the annualized numbers as a comparison tool, not income you should expect.
- NOT MODELED, and each can materially change the real outcome: the probability of assignment (this is not an option-pricing or expected-value model); early assignment on American-style options; rolling a put or call to a new strike or date; implied volatility, time value, and the option Greeks; commissions, fees, and taxes.
- Most important, the DOWNSIDE TAIL is not captured. If the stock falls well below the put strike, you are still assigned at the strike and hold shares worth much less, a loss the premium and the covered call will not cover. The wheel earns steady small premiums in exchange for taking that tail risk, so a high annualized premium return is compensation for risk, not free income.
- This is an estimate for educational purposes only, not investment advice. Options carry substantial risk and can lose money quickly. Review your broker's risk disclosures and consult a qualified professional. Payoff conventions follow the Options Industry Council.
How it works
The wheel is an options income strategy with a repeating cycle. This calculator estimates one full cycle for the exact prices you enter. It is a scenario, not a prediction of what the stock will do.
The cycle it models:
- Sell a cash-secured put. You set aside the strike times 100 per contract in cash (your capital at risk) and collect the put premium.
- Assignment. If the put is assigned, you buy 100 shares per contract at the strike. Your effective cost basis is the strike minus the put premium.
- Sell a covered call against the shares and collect that premium. Collect any dividends while you hold.
- Called away. If the stock rises through the call strike, your shares are sold at that strike, so you also keep the gain from the put strike up to the call strike.
Total profit is premium income plus dividends plus that share gain. Return on capital is total profit divided by the cash you secured. The annualized figures scale that one cycle to a year by multiplying by 365 divided by the days held, which is the conventional way to annualize a premium yield.
Worked example
Sell a $100 put for $2, get assigned, sell a $105 covered call for $2, collect $1 in dividends, over a 60-day cycle, one contract:
- Capital at risk: $100 times 100 = $10,000.
- Premium income: ($2 plus $2) times 100 = $400.
- Dividend income: $1 times 100 = $100.
- Share gain if called away: ($105 minus $100) times 100 = $500.
- Total profit: $1,000, which is a 10 percent return on the $10,000 over 60 days.
- Annualized: 10 percent times 365 divided by 60 = about 60.83 percent total, or about 24.33 percent from premium alone.
That annualized number looks spectacular, which is exactly why it must be read carefully (see below).
Scope and limitations: read this part
The annualized return is a scenario extrapolation, NOT an expected or guaranteed return. It assumes this favorable cycle completes and repeats all year, which rarely happens.
Not modeled, and each can change the real outcome: the probability of assignment (this is not an option-pricing or expected-value model), early assignment on American-style options, rolling a put or call, implied volatility and the option Greeks, commissions, fees, and taxes.
Most important, the downside tail is not captured. If the stock falls well below the put strike, you are still assigned at the strike and left holding shares worth far less, a loss the premium and the covered call will not cover. The wheel earns steady, capped premiums in exchange for taking that large, uncapped downside. A high annualized premium return is compensation for that risk, not free income. This is an estimate for education, not investment advice; review your broker’s risk disclosures and consult a qualified professional.
Sources
- Options Industry Council, options education (cash-secured puts and covered calls)
- Investor.gov (U.S. SEC), options basics and risks
- Standard option payoff at expiration and linear annualization of a periodic yield.
Frequently asked questions
- What is the wheel strategy?
- It is an options income strategy. You sell a cash-secured put to collect premium; if the put is assigned, you buy the shares and sell covered calls against them, collecting more premium and any dividends, until the shares are called away. Then you start again. The wheel earns premium in exchange for taking on stock risk.
- Is the annualized return what I will actually earn?
- No. The annualized figure takes one cycle's return and scales it to a year, assuming you repeat identical cycles, which rarely happens. It is a way to compare trades, not a forecast or a guarantee. Your real results depend on assignment, the stock's path, and whether you keep finding similar premiums.
- What is the main risk the wheel does not show?
- The downside. If the stock crashes below your put strike, you are assigned at the strike and left holding shares worth far less, a loss the premium will not cover. This calculator shows the favorable, completed cycle, so treat the steady premium income as payment for taking that tail risk.
- What does cash-secured mean?
- It means you set aside enough cash to buy the shares if the put is assigned: the strike times 100 per contract. That cash is your capital at risk and the base for the return on capital. Selling a put without securing the cash uses margin and adds leverage and risk this calculator does not model.
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Learn how this works
New to this topic? Our companion guide explains it in plain language: The Wheel Strategy: How the Options Income Cycle Actually Works
Last reviewed June 2026.