Want to earn consistent income from options trading — without overcomplicating it? The wheel strategy is a popular, repeatable approach that combines selling puts and calls on the same stock. It’s designed for long-term investors who want to generate cash flow, one trade at a time.

The best part? You’re only using simple, single-leg options — no spreads, no margin, no complex multi-leg setups.

What Is the Wheel Strategy?

The wheel strategy has three parts:

1. Sell a cash-secured put on a stock you want to own

2. If assigned, sell covered calls on the shares you now hold

3. Repeat — collect premiums whether the stock moves or not

It’s called a “wheel” because the cycle can spin indefinitely: sell puts → get assigned → sell calls → get called away → sell puts again.

How It Works: Example Using AMD

Step 1: Sell a put

• Sell 1 AMD $150 put for $3.00 premium

• Set aside $15,000 in cash

• If AMD stays above $150, keep the $300 and repeat

Step 2: If assigned, sell a covered call

• Own 100 shares at $150

• Sell a $160 call for $2.50

• If AMD stays under $160 → keep shares + premium

• If it rises → get “called away” at $160 (locked-in gain + premium)

Now repeat from Step 1 — sell another put.

Why Traders Love the Wheel Strategy

• ✅ Earn consistent monthly income from premiums

• ✅ Build a stock position gradually and profitably

• ✅ Great for sideways and slightly bullish markets

It’s especially effective on liquid, high-volume stocks with decent option premiums (think: AMD, T, SOFI, KO, SPY).

Risks to Consider

• ❗ Downside risk is real — if the stock drops after assignment, you still own it

• 💼 You need to manage assignment risk, capital efficiency, and strike selection

Like all options strategies, risk management is key. The goal is to collect income — not to “win” every trade.

Using a Calculator to Plan It

Before entering a wheel trade, use Options Income Calculator to:

• Forecast potential ROI across both legs

• See how premiums compare at each strike

• Simulate what-if scenarios for price moves

TL;DR:
The wheel strategy is a beginner-friendly, passive income approach that uses only puts and calls — no margin required. It’s predictable, scalable, and fits perfectly into a disciplined portfolio.