Wheel Options Trading Strategy: Complete DTE Playbook

The wheel is the most practical multi-stage options income strategy. Here's what it is: you sell puts until you're assigned shares, then immediately sell calls against those shares for additional income, then repeat the cycle.

It's not a "get rich quick" system. It's a cash flow machine that converts volatile stocks into steady, compounding income over months and years.

This guide walks you through the complete DTE playbook—how to manage time decay at each stage and maximize your returns.

What Is the Wheel?

The wheel has three phases:

1. Sell puts (waiting phase) → collect premium, hope the stock stays above your strike
2. Get assigned (equity phase) → now you own 100 shares at your chosen price
3. Sell covered calls (calling phase) → collect premium again, get called away at your chosen profit target

Then repeat.

Capital required: One wheel cycle needs enough cash to buy 100 shares. If you're selling $30 strike puts, you need $3,000 reserved. Many brokers let you use margin, but prudent thinking: only sell puts on companies where you can cover the full assignment.

Return profile: Modest but repeatable. Plan on 1–3% per complete 30–45 day cycle, which compounds to 12–36% annualized if you reinvest premiums.

Phase 1: Selling Puts (DTE = 45–60 Days)

This is the entry point. You're collecting premium, waiting to be assigned.

Time Decay During Put Phase

Theta works in your favor. A $1.50 premium sold at 45 DTE might evaporate to $0.30 by 7 DTE (most of your profit locks in mid-cycle).

DTE timeline:

• 45 DTE: You sell for $1.50, delta ≈ 0.20 (20% chance of assignment)
• 30 DTE: Premium decays to ~$0.95 (theta acceleration starts)
• 14 DTE: Premium is ~$0.35 (theta is accelerating hard)
• 7 DTE: Premium is ~$0.10 (maximum acceleration)
• 0 DTE (expiration): Either it expires worthless (profit locked) or you're assigned

Your three exit rules:

1. 50% profit rule: Close early when you've made 50% of max profit. Example: sold for $1.50, close when profit hits $0.75 (at maybe 20 DTE). Frees your capital for the next wheel.
2. Earnings approach: If earnings are coming and IV spikes upward, close the position early. Don't get caught on assignment right before a stock can gap up.
3. Delta management: If delta exceeds 0.50 (> 50% probability of assignment), close or roll the position if you're not ready to be assigned yet.

Phase 1 Execution Checklist

• Pick a stock you'd own long-term
• Sell puts 45 DTE at a strike where you'd genuinely buy
• Collect 1–2% premium relative to strike price
• Set a calendar alert for 7 DTE (theta acceleration point)
• Check delta: if > 0.50 and stock dropped, decide: close for profit or prepare for assignment

Phase 2: Getting Assigned (DTE = Stock Adjustment)

This happens every Friday evening before options expiration. If your stock closed below your strike, you'll be assigned Monday morning.

What Happens at Assignment

Your broker automatically:

1. Removes the put position from your account
2. Deposits 100 shares into your portfolio
3. Debits your cash account for 100 × strike price

You now own shares.

Example:

• You sold 1 XYZ $50 put
• XYZ closes Friday at $48 (below your strike)
• Monday morning: 100 shares appear at your $50 cost basis

Immediately After Assignment: The Transition

You have two paths:

Path A: Sell covered calls immediately (typical wheel)

• On Monday morning, you now own 100 shares
• You can immediately sell calls against these shares
• Use the same stock, target a 2–4% profit over 30 days

Path B: Hold and reassess

• If the stock crashed hard and you're concerned about further downside, hold cash
• Wait for a recovery, then sell calls when IV recovers
• This adds a waiting period but reduces assignment risk if you're wrong

Most wheel traders choose Path A: immediate call selling. It minimizes idle capital.

Phase 3: Selling Covered Calls (DTE = 30–45 Days)

You're now holding 100 shares. You sell calls against them.

The Covered Call Premium

Covered calls typically collect less premium than puts sold at the equivalent probability level, because:

1. The stock doesn't move as much after assignment (volatility has been "used up")
2. You're selling from a position of strength (less downside risk), so buyers pay less
3. IV often drops after assignment

DTE timeline for calls:

• 45 DTE: Premium is lower than put phase, maybe $0.80 for same delta
• 30 DTE: Premium decays to ~$0.50
• 14 DTE: Premium is ~$0.15
• 7 DTE: Premium is near-zero

Choosing Your Call Strike

The strike determines your profit target for the cycle.

Formula:

Profit per share = [Premium collected (put) + Premium collected (call) - Transaction costs] / Stock price
Target profit = (Strike price + Premium from call) / Cost basis - 1

Example with full cycle:

• XYZ stock, you're bullish long-term
• Put sale: Sell $50 put, collect $1.50 → cost basis is $48.50
• Assignment: Own shares at $50 (effective cost: $48.50 after premium)
• Call sale: Sell $52 call, collect $0.90 → target exit is $52 + commission
• Total profit if called away: ($1.50 premium put + $0.90 premium call + $2 appreciation) / $50 ≈ 8.8% for 90 days ≈ 35% annualized

Covered call strikes:

• Conservative: Sell calls 2–3% above current price (less chance of being called away, slower profit)
• Moderate: Sell calls 3–5% above stock price (most common wheel approach)
• Aggressive: Sell calls 5%+ above stock price (higher chance of assignment, but faster cycling)

Most wheel traders use the moderate approach: sell calls at 3–5% above the stock's current price.

Phase 3 Execution Checklist

• On assignment Monday, check the stock's position
• Sell calls 30–45 DTE same day if possible (theta accelerates after you miss days)
• Target a call strike 3–5% above the current stock price
• Set profit goal: "I'll close this if shares get called away at $52" (or your target strike)
• Monitor DTE: if 7 DTE remains and call is in the money, assignment is likely next Friday

Phase 4: Being Called Away (Or Closing Early)

There are three outcomes:

Outcome A: Stock Rallies, Calls Get Assigned

Your 100 shares are "called away" at your target strike. You sell them and keep all premium.

Net result:

• Original cost basis: $48.50USD (after put premium)
• Sold at: $52.00USD
• Total profit: $350USD (minus commissions)
• Capital freed for the next wheel

Then repeat: sell new puts on the same stock or another opportunity.

Outcome B: Stock Drops, Calls Expire Worthless

The stock didn't rally to your call strike. Your calls expire, you keep the premium, but you still own the shares.

Your options:

1. Sell new calls at a lower strike (reset the wheel for another cycle)
2. Hold the shares longer if you like the company fundamentally
3. Close the position entirely if you've changed your mind about owning it

Most wheel traders choose option 1: sell fresh calls, continuing the income generation.

Outcome C: Close Early for Partial Profit

If you've made healthy profit before expiration, close the call position early, take profits, and redeploy capital.

Example: You sold a call for $0.90, it's worth $0.30 now (70% profit), and 25 DTE remains. You close it, pocket the $0.60, and either sell new calls or move on.

The Complete Cycle: DTE Progression

Here's how a full 90-day wheel plays out in real time:

Phase	DTE	Action	Premium	Profit Status
Put Sale	45	Sell $50 put	+$150	Waiting
	30	Monitor theta	—	~$0.90 remaining
	7	Check delta	—	$0.10 left, decision point
	0	Expiration, Assigned	—	Full $150 locked
Call Sale	45	Sell $52 call	+$90	Waiting
	30	Monitor assignment	—	~$0.50 remaining
	7	Check stock price	—	Likely called away
	0	Called away	—	Full $90 locked
Cycle Total	~90	Restart	+$240	4.8% profit on $50 capital

Multi-Wheel Management: Running Multiple Positions

One wheel every 90 days isn't very efficient. Successful wheel traders run 3–4 simultaneous wheels, entering new ones every 30 days.

Portfolio Example: 4 Wheels

Stock	Phase	Cost Basis	DTE	Next Action
SPY	Call phase	$480	20	Being called away next week
AAPL	Put phase	N/A (selling/waiting)	35	Monitor for assignment
JNJ	Call phase	$160	12	Likely to close this week
MSFT	Put phase	N/A (selling/waiting)	38	Monitor for assignment

Capital allocation: $2,400 (SPY) + $3,000 (AAPL) + $1,600 (JNJ) + $5,000 (MSFT) = $12,000 capital generating ~$300–$400/month ($240 * 4 / ~90 days).

That's 2.5–3.3% monthly, compounding to 30–40% annualized (without reinvestment).

Rolling: Extending Your Positions

What if you're assigned, sold calls, but the stock hasn't rallied yet? You can roll the position.

Rolling = close current position + open new one at same or different strike/DTE

Example:

• You sold $52 calls on AAPL, collected $0.90
• 14 DTE remains, stock is at $49 (below your strike, won't get called away)
• Calls are worth $0.08, your profit is $0.82

You can:

1. Close the call for $0.08, keep $0.82 profit, sell new 45 DTE calls at $53
2. Or: close AND reopen in one "roll" action, deferring assignment while continuing income

Rolling extends your positions, but be careful: each roll costs commissions and eats into profits.

Risk Management in the Wheel

Primary Risk: Getting Assigned When You Don't Want To

If the stock crashes and you're assigned, you now own falling shares at a higher price.

Mitigation:

• Only sell puts on quality companies
• Sell puts at strikes where you'd genuinely buy (not desperation prices)
• Monitor delta: if > 0.50, be mentally prepared for assignment

Secondary Risk: Being Called Away When You Want to Hold Longer

If shares rally sharply past your call strike, you're obligated to deliver them.

Mitigation:

• Sell calls only at strikes you'd be happy to exit at
• If you're bullish longer-term, sell calls higher (further from money)
• Or: don't sell calls; hold assigned shares longer as a dividend position

Capital Risk: Concentration

Running 4 wheels on tech stocks concentrates risk. If the tech sector crashes, all 4 positions suffer simultaneously.

Mitigation:

• Diversify across sectors (tech, healthcare, finance, consumer, energy)
• Include broad indices (SPY, QQQ) in your wheel rotation
• No single stock > 30% of your wheeling capital

Monthly Wheel Workflow

Here's how to manage 3–4 wheels simultaneously:

Week 1 of month:

• Check which positions are in call phase or put phase
• For expiring puts/calls, decide: let expire, close early, or roll
• Sell fresh puts if none are pending
• Collect any premiums from expiring positions

Week 2–3:

• Monitor DTE progress
• If assignment happens, immediately sell calls or reassess
• If shares get called away, celebrate profit, redeploy capital

Week 4:

• Plan next month's entries
• Rebalance if one position is oversized
• Reinvest premiums into new wheels

Common Wheel Mistakes (And How to Avoid Them)

1. Selling puts on stocks you'd never own

   • The whole strategy assumes assignment is acceptable
   • Only wheel quality, diversified companies

2. Selling calls too low (getting called away early)

   • You wanted to hold, but shares got called away because you set the strike too low
   • Fix: sell calls 4–5% higher next time

3. Not managing DTE (waiting until expiration)

   • Gamma risk in final days (price swings get exaggerated)
   • Close or roll positions by 7 DTE

4. Running too large (overleveraging)

   • Selling puts on 10 stocks with only $10,000 capital
   • Each should be right-sized to your account

5. Ignoring earnings dates

   • Selling puts on a stock with earnings in 1 week = disaster
   • Check the earnings calendar before entering

Turbocharging the Wheel With DTE Optimization

Once you're comfortable with one wheel, optimize returns:

1. Rapid cycling: Sell puts at 30 DTE (not 45) and calls at 30 DTE. Shorter cycle = more turns per year.
2. IV targeting: Only enter puts when IV Rank > 60%. Skip low-IV environments.
3. Sector rotation: Wheel tech in downturns (low IV, lower premiums), wheel energy in rallies (high IV, higher premiums).
4. Dividend stacking: Hold assigned shares through ex-dividend dates (collect dividends + premium income).

The Long Game

The wheel is built for consistency, not excitement. A trader wheeling $50,000 across 4 positions might collect:

• Year 1: $500–750/month (10–15% annual return)
• Year 2+: $750–1,500/month (compounding as capital grows)

Over 10 years with consistent reinvestment, $50,000 compounds to $600,000–$800,000.

That's the real power of the wheel: boring, steady, repeatable income that grows your portfolio without needing to predict stock prices.

Start with one wheel. Master it. Then add a second. The compounding will speak for itself.