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  1. Tim
    June 13, 2021 @ 9:46 am

    Hi, I thought for the wheel you should sell the covered calls at the same strike as the put you got assigned on. That’s how you make it back. For example, you sold puts at $300 (whatever delta that is at the time) and then it drops to $250. After that you keep selling calls at $300 until you participate in the recovery. Has my interpretation of the wheel been tested? Cheers


      June 14, 2021 @ 4:49 pm

      Hmm, this is different than the typical “hold-the strike” approach.

      I don’t have a hold-the-strike version of the wheel backtested. However, BigERN does a great job explaining why this would not be an optimal approach over at (scroll to section titled “Why not just keep selling puts at the last strike at which you lost money?”).

      TLDR: holding the strike of the short put is only effective if the recovery is swift. A prolonged bear market would likely blow out an account.

      As for setting the call strike equal to the put strike that expired ITM, I speculate that should the recovery be unexpectedly strong, the call will expire ITM for a “loss.” If implementing a tasty-trade-style 45DTE strat for the short calls, the results are essentially all negative (


  2. Simon
    August 23, 2022 @ 9:59 pm

    So how does this work mechanically actually? Meaning when a put goes ITM and is assigned (assuming we take it to expiry), we then sell a covered call and the shares P&L is then logged when the assigned shares are eventually called away (i.e. shares P&L based on the assigned put strike and covered call strike)?


      August 24, 2022 @ 12:15 am

      Yes, when the short put expires ITM and shares are put to the trader, the trader then sells a covered call the following trading day. The long stock covering the short call has a negative PnL since it was purchased at a price above where it’s currently trading (technically the loss is associated with the short put that expired ITM; the net effect is the same).

      If a SPY short put struck at 415 settled at 410, the account balance would go from $41,500 in cash to $41,000 worth of SPY shares + any premium received from selling puts.

      If the price of the underlying increases by more than the premium received from selling puts (eg: when buy/hold is outperforming cash-secured put selling), the trader will need to top off the account, as needed, in order to ensure subsequent short puts are cash-secured.

      When the short call expires ITM and shares are called away from the trader, the trader then tops off the account with enough capital, as applicable, to sell a cash-secured put at the new strike price.


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