The Options Wheel Strategy Explained (with Spreadsheet v2026)

Content

1. Introduction
2. Basic steps of the option wheel strategy
3. Key considerations and essential factors to keep in mind
4. Example with demonstration of tracking trades (spreadsheet screenshots)
5. Conclusion
6. My “Options Trading Wheel Strategy Spreadsheet” – for Excel and Google Sheets
7. YouTube DEMO Video

1. Introduction

The wheel strategy is one of the most practical income-generating approaches in options trading, and one of the most beginner-friendly ways to get started with real trades.

It gives you a structured, repeatable process: sell cash-secured puts, potentially own the stock, sell covered calls, and collect premium at every step. If you choose the right stocks and stick to the process, the income compounds over time.

I have been running the wheel strategy with real money since 2022 and tracking every trade in a dedicated spreadsheet. In this guide I explain the strategy from the ground up, including how I track every step using the TOCF Wheel Strategy Spreadsheet v2026, available in Excel and Google Sheets.

2. Basic steps of the options wheel strategy

The wheel strategy is systematic and mechanical. That is what makes it powerful, you are not guessing. You are following a process. Here are the four steps:

Here are the 4 steps in the process:

• STEP 1 : Sell a cash-secured put (CSP) – Choose a stock you are comfortable owning. Sell an out-of-the-money put and collect the premium. You keep the cash ready as collateral in case you are assigned. By selling this cash secured put (CSP), you receive a credit (premium) to your account.

• STEP 2 : Put expires or you get assigned – If the put expires worthless, keep the premium and go back to Step 1. If the stock falls below your strike, you get assigned and buy 100 shares (one option contract) at the strike price.

• STEP 3 : Sell a covered call (CC) – With 100 shares in hand, sell a covered call above your cost basis. Collect more premium. If the call expires worthless, sell another one.

• STEP 4 : CC assigned — wheel complete – If the stock rises above your call strike, your shares are called away. You sell at the strike price, keep the premium, and restart from Step 1.

Each time you sell an option — put or call — you receive a credit (the premium). If the stock pays a dividend while you hold it, that is a third income stream on top of the two premiums. The wheel is sometimes called the Triple Income strategy for this reason.

To fully understand this article, the basic knowledge of a put and a call option contract should be known. If this is not the case, or in case you need more explanations, you can find several basic articles on our website (I advise to first study these option basics).

Important: the wheel is inherently bullish : You are committing to buy a stock if assigned. Choose stocks you are genuinely comfortable owning for the long term. A falling stock means assignment at a higher price than the market and potential unrealised losses while you work the covered call side. This is not a strategy for stocks you are indifferent about. Stock selection is the most important decision you make.

Let’s delve into the various steps, and I’ll also showcase how to log the Wheel Strategy trades using a specialized spreadsheet tool I’ve designed to monitor the strategy’s outcomes.

3. Key considerations and essential factors to keep in mind

Before embarking on the wheel strategy journey, it’s crucial to factor in these considerations, ensuring a balanced approach between risk and potential returns:

a. Stock selection

Two things matter above everything else when choosing a stock for the wheel:

• Quality of Asset: choose stocks you would be genuinely happy owning for two or more years. Fundamentally strong companies in sectors with a reasonable long-term outlook: high-quality stocks or ETFs only, the ones that you wouldn’t mind owning in your portfolio.
• Liquidity: Choose assets with high liquidity to ensure tight bid-ask spreads, which can reduce the cost of entering and exiting trades, it will increase your profitability in the long run.

Before committing to a stock, ask yourself three questions:

• Q1 Am I comfortable owning 100 shares of this stock for the long term — including if the price drops 30%?
• Q2 Do I have the cash to buy 100 shares (strike price × 100) without needing that capital for an extended period?
• Q3 Do I have a neutral-to-bullish long-term view on this stock?

If the answer to any of these is no : choose a different stock.

When determining the stock for your wheel strategy, it’s vital to narrow down potential candidates by addressing these three questions / criteria :

(1) Q1 Am I comfortable owning 100 shares of this stock for the long term — including if the price drops 30%?

(2) Q2 Do I have the cash to buy 100 shares (strike price × 100) without needing that capital for an extended period?

(3) Q3 Do I have a neutral-to-bullish long-term view on this stock?

b. Determining the strike price and expiration date of the CSP

When navigating the Wheel Strategy, a good selection of the strike price and expiration date is pivotal to its success.

Selecting a strike price for the Cash-Secured Put (CSP) too close to the current share price can hasten assignment. Conversely, setting it too distant from the current share price, or too far out of the money, may yield minimal and too low premiums. The chosen expiration date largely influences an option’s extrinsic value, which is shaped by both time value and the underlying stock’s volatility.

Research from Tastytrade suggests that the sweet spot for selling an Out of the Money (OTM) option is approximately 45 days to expiration. This is the window where time decay accelerates most, you benefit from theta working in your favour: this period typically witnesses an accelerated rate of time value decay, implying that the option’s time value diminishes, during this time frame, more rapidly than options with longer durations. For the strike price, I prefer to target a delta between 0.16 and 0.30. That gives a 70–84% probability the option expires out of the money and you keep the full premium without assignment.

For position sizing, I generally lean towards selling only one option contract for each underlying. However, the actual number of contracts can vary based on the available cash and the stock’s price. For stocks with a lower share price, I might opt for more contracts.

The decision to close an option position before its expiration can be a point of debate, because the initial mindset was to be ok to buy the shares when assigned. Closing the position early has also its advantages, but I will not go into this topic in the context of the options wheel strategy.

c. Determining the strike price and expiration date of the CSP

Also, the meticulous selection of the strike price and expiration date for the Covered Call (CC) is paramount, for the success and profitability of the strategy.

The covered call strike must always be set above your cost basis, not just above your purchase price, but above your actual cost basis after adjusting for all premiums received.

This is why tracking the cost basis precisely matters so much. If you sell a covered call with a strike below your cost basis, you risk being assigned at a loss on the stock. The v2026 spreadsheet calculates and displays your cost basis automatically at every step of the cycle.

If the strike price is set significantly higher than current share prices, the resulting premium may be too low again. First step for determining a good strike price is calculating the cost basis of the assigned shares.

In the example above, after being assigned to buy the shares at $50, my overall cost basis for 100 shares of IBM was $48 per share (($5,000 – $200 premium received)/100). This means whenever I sell a covered call and I would select a strike price below my cost basis, I run the risk to get assigned and not make an overall profit.

Let me demonstrate with an example.

Imagine the stock drops to $40 when I got assigned the stock. Now I want to sell a covered call with strike price $45 and I receive a premium of another $2. This brings my overall cost basis to $46. In case the share price moves up and above $45, I will get assigned to sell my 100 shares at the strike price of $45 and receive $4500.

In this case my net profit/loss will be :

-$5,000 (buy 100 shares) + $200 (premium CSP) + $100 (premium CC) + $4.500 (sell 100 shares) = -$200 (minus $200)

So this is absolutely something we want to avoid or a risk that I need to take into account. And to make this analysis I need to always know the cost basis of my position.

Given the nuanced interplay of both factors strike price and expiration date, my personal selection criteria for CSPs are: 14 DTE and deltas ranging from 0.16 to 0.35 depending on the share price evolution and my cost basis.

It is possible that in some cases, I will want or need to sell a CC with strike price below my overall cost basis, but this is usually only the case the stock has dropped substantially. In that case the premium in the far OTM calls are not juicy enough. Hence the importance to select shares that are likely to move upwards.

It is important to be aware of this, and adjust your strike price according your intentions.

d. Mistakes to avoid

Maintaining clarity about your position’s status is crucial, as regular analysis and corresponding actions are often necessary.

This underscores once more the significance of a comprehensive tracking spreadsheet. Operating without such a tool can lead to bad decisions, which are best avoided. The reasons why I’ve created a dedicated spreadsheet.

It’s widely recognized that stock transactions come with inherent risks. Stock prices can plummet, potentially leaving me with devalued shares or compelling me to retain the shares longer than anticipated. However, in moments when share prices are in decline and assignments occur, it’s vital to stay calm and composed.

You started with a plan so stick to it!

It’s essential to recall the initial intent: desiring the stock. Now, there’s an opportunity to acquire those shares at a more favorable rate. If my initial sentiment towards the stock remains unchanged, owning it should be viewed positively. And even if the stock’s descent persists, it’s imperative to remember the commitment was long-term.

In essence, the wheel strategy shouldn’t be employed, and puts shouldn’t be sold on stocks you aren’t keen on owning. Adhering to this principle ensures peace of mind, eliminating any cause for unnecessary panic.

4. Example with demonstration of tracking trades

The following example walks through a full wheel cycle using SOFI (SoFi Technologies). These are the exact numbers used in the TOCF Wheel Strategy Spreadsheet v2026 user guide and demo video.

a. Reserve capital (Deposit Cash)

Before selling any option, I deposit the capital I am committing to this wheel cycle. In the spreadsheet I use the Deposit Cash action, enter $15,000 as a Credit. The dashboard immediately shows Cash Balance $15,000 and Current State: Cash Reserved.

b. Step 1 : Selling a cash secured put (CSP)

The process starts with selecting an underlying stock which I wouldn’t mind owning or buying because my overall bias of the stock on the long term is bullish (it is wise to use only strong reputable stocks with and overall expectancy of the share price moving upwards).

Let’s take $SOFI as an example.

So if I won’t mind buying the shares, I certainly won’t mind buying them at a lower price.

Also choose an underlying you can afford : your account value must be 100x greater than the price of stock (the reason is explained above).

Cash secured means that I, being the seller of the put options have the cash available in case I would get assigned and I have to buy the stock.

In this example, to be cash secured I have to keep $15,000 (column cash allocated) aside for this trade (transaction fees not considered).

SOFI was trading at $13.20 and I sold a $10.00 strike CSP (well out of the money), collecting $0.82 premium with 67 DTE (a bit longer then normally). Net credit after fees: $80. The spreadsheet shows Cash Allocation $1,000 (collateral), Cash Balance $15,080, Current State: Open Put.

Let’s look at the possible outcomes.

First outcome : the option expires worthless and has no intrinsic value (out of the money – OTM)

Imagine that at expiration, SOFI is trading around $12. This means that the owner of the put option (the buyer of the option that I have sold) will NOT execute his right to sell his 100 shares to us at the strike price of $10, because he can sell them in the open market for $12 ($2 more than selling to us). As long as the share price on the open market remains above the strike price of $10, the option contract has no intrinsic value and will expire worthless.

This would mean for me, as the seller of the put option, that the contract, and my short position, no longer exists and that my net result +$80, the premium received.

In this case, I can restart over and sell another cash secured put to receive more premium. You could also state that the general idea of selling a cash secured put is that you are getting paid to wait until you can buy the stock at a lower price.

Second outcome: the option expires with intrinsic value (in the money – ITM) and I get assigned. In this case we go to Step 2.

In this example I did take an intermediate step : I rolled up the put to a higher strike price, due to raising share price.

In the example, by 14 February, SOFI has rallied to $13.85. I roll the put up from $10.00 to $10.50 (same expiry) for a net additional credit. The combined premium on the new row is $1.35 per share ($0.82 original − $0.38 BTC cost + $0.91 new premium). Running Cash Balance: $15,133.

Then I got assigned because after a while the price did drop below $10.50. So we go to step 2

b. Step 2 : Being assigned to buy the shares

By March expiry, SOFI has pulled back to $10.20 — below the $10.50 rolled strike. The put is assigned. I marked the row: Status Assigned, Trans Type ASS, Closing Price $10.50 (the strike — not the market price). Cash Allocation resets to zero. Current State: Put Assigned.

This means that the owner of the put option can and normally will execute his right to sell his 100 shares to us at the strike price of $10.50. He will absolutely do so because he can sell them to us for $0.30 more than what they are worth in the open market ($10.20). As long as the share price on the open market is below the strike price of $10.50, the option contract – the buyer has bought – has an intrinsic (real) value.

This means for me as the seller of the put option, that the contract will get assigned for execution, and that I will need to buy 100 shares of SOFI at the contract strike price. I will pay 100 x $10.50= $1050 + fees and I will receive 100 shares that are valued on the open market at that moment $10.20

So I did get assigned and had to buy the shares.

After assignment, the short position no longer exists (and is closed in the spreadsheet) and I add the buy transaction of the shares. The share price I enter is the put strike — $10.50 — not the current market price of $10.20. This is one of the most common mistakes new users make. The spreadsheet calculates the cost basis automatically: $9.22 per share after adjusting for all premiums.

The spreadsheet calculates the net cost basis considering the purchase price, the received premiums, and the fees paid. The spreadsheet also calculates the cash balance, unallocated cash, share and option results separately and of course the overall net result considering the share price at that moment.

Now with the shares in my portfolio, I will proceed to step 3. But I was lucky that the company was paying dividends right after being assigned. SOFI pays an $0.18 dividend on 28 March. I add a Receive Div row — Credit, $18. Cash Balance increases by $18 and the cost basis drops to $9.04 per share. Every dollar of dividend collected lowers the break-even further.

So now I go to step 3.

c. Step 3 : Selling a covered call (CC)

I have now 100 shares in my portfolio. I am obviously hoping that the shares will rise above the initial buy price of $10.50 to make a profit on the buy-sell shares transaction. But I am also selling a covered call to collect more premium, which lowers my overall cost basis.

By 5 April, SOFI did recover to $10.80. I sold a $12.00 covered call with 40 DTE, collecting $0.68 premium. The $12.00 strike is well above my cost basis of $9.04, profitable on the stock no matter what happens. Current State: Covered Call Open.

Remember, “Covered” means that I have, as the seller of the call option, the shares available in my portfolio in case I would get assigned. Imagine if I don’t own the shares and will get assigned to sell the shares at strike price, then I will have to cover my position and buy the shares on the open market (at a higher price than the strike price) and sell them to the owner of option contract (at strike price), resulting in a negative transaction result.

In this example, I have my call position with strike $12 covered with the 100 shares of SOFI.

Let’s look at the possible outcomes.

First outcome : the option expires worthless and the CC has no intrinsic value (out of the money – OTM)

Imagine that at expiration 15/5/26, SOFI is trading around $11. This means that the owner of the call option will NOT execute his right to buy his 100 shares from me at the strike price of $12, because he can buy the shares in the open market for $11 ($100 cheaper than exercising the option contract). As long as the share price on the open market remains below the strike price of $12, the option contract has no intrinsic value and will expire worthless.

In case the option expires worthless, the short position stops to exist, and I can rinse and repeat step 3.

Second outcome : the CC option expires in the money and has intrinsic value (in the money – ITM) and I get assigned to sell the shares.

And this is what happened here. The share price went up and I got assigned to sell the shares. In this case we went to Step 4

d. Step 4 : Being assigned to sell the shares

On 15 May, SOFI is at $12.35 — above the $12.00 strike. The call is assigned. I complete two rows: the CC row (ASS / Assigned) and the Buy shares row (STC / Closed, Closing Price $12.00).

I got assigned because the option has $35 of intrinsic value. After assignment, the short position (CC) no longer exists and my net result at that moment will be a positive.

The full profit breakdown: CSP 1 net premium + Roll net credit + Dividend + CC net premium + Stock profit = $357.50 total realised profit on $15,000 capital. I know that I only required a reserved capital of around 100 x share price, so I could have sold more CSPs to make better use of my capital but for this example it doesn’t really matter.

With the wheel strategy, I am less affected by down and up moves moves of the stock. I have to admit that I can’t benefit 100% of the up moves as well, but again if I would have a crystal ball…

The power of this wheel strategy comes from selling option contracts and receiving premium regardless of the share price movement. Selling options allows me to not be right all the time regarding the movement of the share price.

In this example I did profit of a dividend payment, adding premium and augmenting your return.

In summary, running the options wheel strategy is a great way to learn the basic about options trading (puts and calls mechanisms), and at the same time it allows to generate “relatively” safe income, experiencing real trades.

Of course, you must realise that options trading comes with a specific risk and you should know this risk exists before entering a trade. But the options wheel strategy, is dealing with cash secured puts and covered calls (no naked positions), which makes it much more conservative strategy.

5. Conclusion

The option wheel strategy is sometimes called the Triple Income or Triple Cash Flow strategy. It is indeed possible to have 3 income streams during the entire process of the strategy: premium of selling CSPs, the possible profit of a share transaction (buying low and selling higher) and premium of selling CCs. And when lucky, it is even possible to profit from receiving dividend when holding the shares.

This strategy fits the investor, who has sufficient cash available for a longer period, who is looking to buy a good stock , who wants to profit of buying the shares at a lower price, who wants to get paid while waiting, and once the shares owned, who is looking to continue generating income via selling premium of CC, lowering the overall or average cost basis per share.

Tracking cost basis matters

In the example, I bought SOFI at a $10.50 strike, but my real cost basis after all premiums and the dividend was $8.38 per share. When the covered call was assigned at $12.00, I made the difference between $8.38 and $12.00 — not $10.50 and $12.00. That is the wheel working correctly. Every step reduces your break-even and widens your profit margin. The v2026 spreadsheet calculates this automatically at every step.

Although the strategy is a relatively simple and very attractive process and strategy, every investor must realise that there is a risk involved, being that the stock price can drop, even significantly, during a certain period of time. In that case he will get assigned the shares, with the risk that the shares go even lower or that they don’t recover immediately, with the possibility having the capital locked or required until the position is closed, after recovering.

Hence to choose the right stock that you are comfortable with holding for the long term. Then there is nothing to worry about if you do get assigned during the process.

Another risk would be that if the stock price rises up significantly, you will miss out on a lot of gains as compared to if you just bought the shares directly. As mentioned above, this strategy is mainly for consistent cash flow and not to profit from big share price moves.

Therefore, first study the strategy, next apply the strategy with a smaller capital required to experience it with real trades and real money, and build from there.

Cheers and good luck.

Visit our webshop : https://www.tradingoptionscashflow.com/product/trading-options-wheel-strategy-spreadsheet-google-sheets-excel v2026/

Another good read to improve your insight in the wheel strategy :

• Cash Secured Puts – A deep dive
• Covered Calls – A thorough examination

Cheers and good luck.

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