Question 1

What is the wheel strategy in crypto?

Accepted Answer

The wheel is a two-step options income loop you run on a coin you are happy to own. Step one: you sell a cash-secured put below the current price and collect a premium, setting aside enough cash to buy the coin at the strike if you are assigned. If price stays above the strike, the put expires, you keep the premium, and you simply sell another put — collecting income while you wait. If price drops through the strike, you are assigned: you buy the coin at the strike, but your effective cost basis is lower because the premium you already collected comes off the price. Step two begins here: now holding the coin, you sell a covered call above your cost basis and collect another premium. If price rises through the call strike, your coins are called away at a profit — you have completed the wheel and you start over by selling a put again. If the call expires, you keep that premium too and sell another call. The whole point is to earn premium continuously whether you are waiting to buy, holding, or waiting to sell, and to lower your entry cost every time you get assigned. It works best on assets you would hold anyway in a sideways-to-slightly-bullish market; it does not protect you from a deep, sustained crash, because you still own the coin all the way down.

Question 2

How is the annualized return calculated?

Accepted Answer

Each leg's return is the premium or profit measured against the capital it ties up, then scaled to a full year so you can compare trades of different lengths. For the cash-secured put, the per-cycle yield is the premium divided by the strike — the cash you set aside — and the annualized figure multiplies that by 365 divided by the days the put is open. For the covered call written after assignment, the yield is the call premium divided by your assigned cost basis, annualized the same way over the call's days. For the full assignment cycle — put assigned, then coins called away — the profit is the capital gain from your put strike up to the call strike plus both premiums, divided by the capital you deployed, then annualized over the combined days of both legs. The calculator also shows an income-only path where both options expire worthless: you never take delivery, and your return is simply both premiums over the same capital and time. Annualizing is a projection, not a promise: it assumes you can keep re-running the wheel at the same yield, which real markets rarely let you do, so treat the annualized numbers as a way to rank opportunities rather than a rate you will actually bank.

Question 3

What is my cost basis and break-even after assignment?

Accepted Answer

When a cash-secured put is assigned, you buy the coin at the put strike, but you already pocketed the premium, so your true cost basis is the strike minus the premium per unit. That lower basis is also your downside break-even on the position: as long as the coin is worth more than the strike minus the premium, you are still ahead on the assignment, and only below that level are you actually underwater. The premium is a cushion, not a hedge — it lowers your entry, but it does not stop losses beyond it, so a coin that keeps falling will still lose you money one-for-one below the break-even. Once you are holding, the covered call you sell lowers the basis further by its own premium, giving you a little more room each cycle. This is why traders run the wheel on coins they genuinely want to own: assignment is not a failure, it is the plan, and the reduced basis is the reward for taking delivery. The calculator shows the basis after the put, the break-even, and how the covered-call premium nudges the basis down again, so you can see exactly how far price has to fall before the cushion runs out.

Question 4

What is the catch — where does the wheel lose money?

Accepted Answer

The wheel's weakness is a sharp, sustained fall in the underlying, because at every stage you either own the coin or are obligated to buy it. Sell a put and the price gaps far below your strike, and you are assigned a coin now worth much less than you paid, with only the small premium as a cushion — the same loss a spot buyer would take, minus the premium. Then, holding a coin that has dropped, you can only write covered calls at strikes near or below your cost basis to collect meaningful premium, which caps your recovery if price bounces: you get called away at a loss, or for a gain smaller than simply having held. The other, subtler cost is the capped upside on the covered-call leg. If the coin rips far above your call strike, you are called away at the strike and miss the rest of the move — the wheel trades the tail of a big rally for steady premium. So the strategy shines in choppy, flat, or gently rising markets and on assets you are comfortable holding through a drawdown; it underperforms in a violent crash, where the premiums are nowhere near enough to offset the drop, and in a runaway bull market, where the called-away cap leaves money on the table. This calculator makes both edges visible: the break-even shows how far your downside cushion reaches, and the max-profit figure shows exactly where your upside gets capped.

Wheel Strategy Calculator

The two paths the wheel can take

Assignment is the plan, not the accident

The math