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The wheel: cash-secured put, then covered call

Sell a put. If assigned, sell a call on the shares. If called away, sell a put again. Assignment is the loop.

Lap 1: cash-secured put. Assigned: you own 100. Lap 2: covered call on those shares. Called away: cash is free — sell a put again. Two shorts, one stock loop. Not a fifth ticket.

AAPL $190. STO (sell to open) $180 put for $3. Assigned: basis ≈ $177. Then STO (sell to open) $185 call for $4. Called away at $185: you sold above basis. If you would not want the shares at $180, do not start.

The lab is lap 1 — the short $180 put. Lap 2 is the covered-call lesson. Assignment is the loop, not a Greek.

the-wheelLoop: sell a put, if assigned sell a call on the shares, if called away sell a put again.The wheel — a loop, not a fifth ticketTeaching sketchLAP 1STO a putCash secured. Wait.ASSIGNEDOwn 100Basis ≈ K − premiumLAP 2STO a callCovered call on those sharesCalled awayCash free → sell a put againStill above put K: keep the credit,sell another put. BTC skips shares.Still below call K: keep shares,sell another call.
Two shorts and one stock loop. Assignment is the feature. If you would not want 100 shares at the put strike, do not start.

Teaching lab

Lap 1 — the cash-secured put

AAPL $190. STO $180 put for $3. Lap 2 (covered call) is the other lesson. Slide this short put.

P/L / share
+1.43
×100
+143
Delta
+0.200
Gamma
-0.0206
Theta / day
+0.0587
Vega / vol pt
-0.1525

P/L / share

vs the lesson entry

3.00-26.36$150$170$190$210$230

Delta

share-equivalent

0.990.00$150$170$190$210$230

Gamma

peaks near the strikes

0.000-0.031$150$170$190$210$230

Theta / day

clock

0.0750.000-0.018$150$170$190$210$230

Vega / vol pt

fear priced in

0.00-0.21$150$170$190$210$230

Rho / rate pt

small at 30 days

0.1470.000$150$170$190$210$230

Assignment is the loop, not a Greek. Premium cushions the print; it does not cap a crash.

Try it: Practice train (classroom only)

Tickets for this structure

BTO (buy to open) · STO (sell to open) · BTC (buy to close) · STC (sell to close). Illustrative fills only. We never send these orders.

STO (sell to open)

Open a short

Sell to open — the put (lap 1)

AAPL $190. STO (sell to open) 1× 30-DTE (days to expiration) $180 put at $3.00 ($300). Cash $18,000. Stay above $180: keep $300.

BTC (buy to close)

Close a short

Buy to close — skip assignment

Put later $5.50. BTC (buy to close) at $5.50. P/L (profit and loss) = −$250. No shares. Expire ITM (in the money) instead to start lap 2.

STO (sell to open)

Open a short

Sell to open — the call (lap 2)

Assigned 100 at $180 (basis ≈ $177). STO (sell to open) 1× 30-DTE (days to expiration) $185 call at $4.00. Now a covered call.

BTC (buy to close)

Close a short

Buy to close — the call, or get called away

Call later $1.20: BTC (buy to close), keep shares. Finish $192: shares sold at $185; then STO (sell to open) a new put.

Two laps, one thesis

Lap 1 is a CSP (cash-secured put): STO (sell to open) the put, BTC (buy to close) only if you refuse the stock. Lap 2 is a covered call: STO (sell to open) the call on shares you already hold. There is no BTO (buy to open) in a clean wheel unless you are buying the shares in the open market instead of taking assignment.

AAPL $175 at put expiration: you own 100 at $180. The $3.00 put premium cushions the print, it does not cap the loss. If AAPL then trends to $150, selling $185 calls will not get you out — the wheel is not a hedge. Stand aside into earnings inside the DTE (days to expiration).

How the Greeks move

Lap 1 is a short put: negative delta, you collect theta. Slide AAPL toward $180: gamma jumps. After assignment, the Greeks become the covered-call lab — shares plus a short call.

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Teaching numbers only — not a live quote, not a fill, not financial advice. All lessons · Back to Practice · Replay · Journal.