How It Works
The Options Wheel Strategy, Explained Simply
The wheel combines two common strategies: selling a cash-secured put when you are willing to buy shares, then selling a covered call after you own them. YieldTerminal helps you plan one understandable step at a time.
1. Enter a ticker
Start with a company you already know and would be comfortable holding. YieldTerminal is not designed to make an unfamiliar stock safe.
2. Choose a strategy
Choose a covered call if you already own 100 shares, or a cash-secured put if you have enough cash and are willing to buy 100 shares.
3. Review the plan
See the estimated capital, strike, expiration, premium, breakeven, and the main outcome to understand before placing the trade.
4. Use your own broker
Review the live quote and risks, then place the order yourself. YieldTerminal remains an educational planning tool, not a broker.
The wheel in one line
Assignment is not guaranteed, and the cycle does not remove the risk of owning a falling stock.
You already own the shares
You collect premium for agreeing to sell 100 shares at the strike price. The premium provides a small buffer, but your upside is limited and the shares can still decline.
Open covered call calculator →You are willing to buy the shares
You collect premium and reserve enough cash to buy 100 shares at the strike. If assigned, you own the shares even if their market price has fallen further.
Open cash-secured put calculator →The main beginner rule
Do not sell a cash-secured put on a stock you would not want to own, and do not sell a covered call at a strike where you would regret selling your shares. Premium is compensation for accepting those obligations, not free money.
Beginner Questions
Do I have to use both strategies?+
No. You can use only covered calls, only cash-secured puts, or consider both as separate steps. Start with the strategy you understand and can fully fund.
How many shares are in one options contract?+
A standard U.S. equity options contract normally represents 100 shares. That is why a covered call usually requires 100 shares and a cash-secured put reserves cash for 100 shares.
Can the wheel strategy lose money?+
Yes. Premium does not prevent losses if the stock falls substantially. Covered calls also limit upside above the strike, and cash-secured puts can require you to buy shares during a decline.
Where do I place the trade?+
You place the trade through your own options-approved brokerage account. YieldTerminal does not connect to your broker or execute orders.
Ready to see a plan in plain English?
Enter a ticker and let YieldTerminal organize the capital, strike, expiration, breakeven, and next step.
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