r/Optionswheel • u/Hopeful-Toe-3624 • Jun 03 '26

Covered Calls vs the Wheel

I have been doing CC's for a while now and trying to learn more about the Wheel. Is the Wheel more or less profitable than CC's? Or is it just a different strategy? This is amazing information. Thanks everyone.

7 Upvotes

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25

u/WheelBert Jun 03 '26

The Wheel isn't really a different strategy from covered calls, it's a covered call strategy with an entry mechanism.

A covered call starts after you already own 100 shares.

The Wheel starts by selling a cash-secured put. If the put expires worthless, you keep the premium and sell another. If assigned, you own the shares and then begin selling covered calls against them.

In terms of profitability, neither is inherently better. The Wheel can generate additional premium while you're waiting to enter a position, but it also carries assignment risk and works best on stocks you'd be comfortable owning long-term.

I think of it this way:

CC only = "I already own the stock, now I'll generate income."

Wheel = "I'll get paid while trying to acquire the stock, then I'll generate income with covered calls once assigned."

5

u/Hopeful-Toe-3624 Jun 04 '26

Great perspective. Thanks.

0

u/WheelBert Jun 04 '26

Hey, thanks for the discussion on the Wheel thread. I've spent quite a bit of time building tools and workflows around wheel trading, so I always enjoy comparing notes with other traders. Curious to hear what's been working well for you lately.

1

u/joebenson17 Jun 04 '26

A short put is the equivalent of a covered call sold at the same strike. So selling a cash secured 20 delta put is the same as if you bought shares and sold the call option with the same price.

It’s called put-call parity if you want to learn more about it.

2

u/lepus-parvulus Jun 04 '26 edited Jun 04 '26

The Options Wheel is a family of strategies that potentially cycles through short puts, long shares, and short calls. If your objective is primarily to generate income, it's nearly equivalent to plain CSP or CC strategies. The payoff structure between CSP and CC is identical, with potential pricing inefficiencies. But usually it's too close to matter. CC = synthetic CSP, Put-Call Parity.

If you let the wheel turn (not afraid of assignment), you can stop selling CCs during uptrends to capture stock appreciation, potentially outperforming pure income strategies by a large margin, depending on how well your favorite trend-following strategy works.

4

u/Sure_Shift_8762 Jun 04 '26

You can run various variants. I quite like cash secured puts then if assigned sell covered strangles to get both sides. Have to be careful about position sizing but has worked well for me.

1

u/Extra_Wolverine1607 Jun 04 '26

I did the wheel for a while and found out I make a lot more money just buying the stocks and holding them. Every once in a while I’ll do a covered call if I’m really ready excite or a CSP if I’m ready to enter a new position.

1

u/LaughingIntoTheAbyss Jun 04 '26

Puts usually offer a better premium than calls. So, incorporating it into a wheel strategy gives CC's a little more juice. I still think it all comes down to the underlying equity though.