The wheel is popular. It's touted as a "passive income machine" and a "beginner-friendly strategy." But is it actually good?
Let's be honest.
Wheel Strategy Income Planner
Project your income over time with the wheel strategy (selling puts + calls)
The Good: Why The Wheel Actually Works
Advantage 1: It's Genuinely Simple
You don't need advanced math or lightning-fast execution. You:
- Sell puts
- Wait
- Sell calls (maybe)
- Repeat
A middle-school student could execute it. Execution simplicity is underrated in investing.
Advantage 2: It Works In Multiple Market Conditions
- Bull market: Calls get called away at profit
- Bear market: Puts expire worthless, you rotate to next stock
- Sideways market: Theta decay works for you every single day
There's no market regime where the wheel is "wrong." It adapts.
Advantage 3: Risk Is Capped (Mostly)
If you sell puts on quality stocks:
- Downside is limited (you own shares at a price you chose)
- Upside is capped (you get called away)
- You can calculate your max loss in advance
This is comforting compared to, say, buying options (where you can lose 100%).
Advantage 4: It Generates Real Cash Flow
Unlike buy-and-hold (where you wait for dividends), the wheel generates monthly or bimonthly cash (premiums + stock appreciation).
A $50,000 account can generate $400–$800/month in real income.
For some traders, this is life-changing.
Advantage 5: It Creates Discipline
The wheel forces you to:
- Pick stocks in advance (no chasing momentum)
- Stick with them for 90 days (no panic selling)
- Repeat the same pattern (no reinventing the wheel mid-cycle)
This discipline eliminates many beginner mistakes (emotional trading, over-trading, etc.).
The Bad: Legitimate Downsides
Disadvantage 1: Returns Are Capped
The wheel typically returns 8–18% annualized with consistency.
That's good, not great.
In a bull market (like 2023–2024), buy-and-hold returnsbeat the wheel dramatically:
- S&P 500 returned 25%+
- Wheel traders captured 8–18%
The missed upside is real.
Disadvantage 2: You're Married To Your Stocks (For 90 Days)
You pick AAPL. You commit to 90-day wheels on AAPL.
What if Apple releases a terrible product mid-cycle? What if there's a lawsuit? A dividend is cut?
Too bad. You're locked in for 90 days.
Compare this to buy-and-hold, where you can exit anytime. The wheel's lack of flexibility is constraining.
Disadvantage 3: Capital Inefficiency
Running the wheel requires tons of capital sitting around waiting to be deployed.
Example: You run 4 wheels, each requiring $50,000 (put strike × 100). That's $200,000 capital for monthly income of $1,600 (0.8% monthly = 9.6% annualized).
Compare: A $50,000 S&P 500 index fund returned 24% in 2024 ($12,000 gain, no effort needed).
The wheel is capital-intensive for the returns you get.
Disadvantage 4: Taxes Are Expensive
Each wheel is:
- Selling a put: taxable event (short-term capital gain on premium)
- Selling call: taxable event (unrealized gain tracking)
- Dividends (if assigned before ex-date): dividend income
- Stock appreciation: capital gains
That's multiple tax events per 90-day cycle.
If you're in a high tax bracket (federal + state), taxes eat 20–30% of your profits, making the wheel less attractive.
Disadvantage 5: Assignment Risk Is Real
Theory: "I'd be happy to own the stock." Reality: The stock crashes 20%, you're assigned, you're miserable.
One trader sold puts on airlines stock during COVID. "I'd buy at $15," he said. Assignment happened at $15. Stock crashed to $8. He was underwater for 18 months before recovering.
Sometimes your thesis breaks. The wheel doesn't account for that.
Disadvantage 6: Opportunity Cost Is Invisible But Large
You lock in 6% profit on a wheel (put + call premiums + appreciation).
Meanwhile, the stock rallies 30% and you get called away.
On paper, you made 6%. But you could have made 30% if you'd just bought and held.
This opportunity cost compounds over years.
The Ugly: Worst-Case Scenarios
Scenario 1: You Get Assigned Right Before A Crash
You sell puts on XYZ at $100 strike. You get assigned. The next week, the Fed announces an emergency rate cut. Market crashes 10%. XYZ is now $90.
You own it at $100 effective cost, trading at $90. You're stuck holding bags.
Admittedly, this is rare. But it happens.
Scenario 2: You Over-Leverage And Margin Gets Called
You run 10 wheels on $50,000 capital (50% margin). Market drops 5%. Your options positions swing against you. Margin call. Forced liquidation at losses.
This kind of blowup happens to 5–10% of retail options traders.
Scenario 3: You Discipline Breaks And You Stop Trading Wheels
You start with discipline. By month 6, you're bored. You stop selling puts. Your capital sits idle. Returns drop to zero.
The wheel requires consistency. Most people quit before it compounds.
How The Wheel Compares To Alternatives
The Wheel vs. Buy and Hold
| Metric | Wheel | Buy & Hold |
|---|---|---|
| Expected Annual Return | 10–15% | 8–12% (historical) |
| Max Return (Bull Market) | 15% (capped by calls) | 25%+ |
| Min Return (Bear Market) | 0% (puts expire) | -20% or worse |
| Time Required | 30 min/month | 0 min/month |
| Complexity | Medium | Low |
| Tax Efficiency | Poor (multiple events) | Good (long-term holds) |
| When It's Better | Sideways/down markets | Bull markets |
Verdict: Wheel is better in sideways/down markets. Buy & hold is better in bull markets.
The Wheel vs. Covered Calls Only
Some traders skip put-selling and only sell covered calls on stocks they own.
| Metric | Wheel | Covered Calls Only |
|---|---|---|
| Income | Premium from puts + calls | Premium from calls only |
| Complexity | Medium (puts + calls) | Low (calls only) |
| Cash Requirements | High (reserves for puts) | None (you already own stock) |
| Flexibility | Low (locked 90 days) | Medium (can exit anytime) |
Verdict: Covered calls only = simpler but less income. Wheel = more income but more complexity.
The Wheel vs. Buy-and-Sell Calls (Iron Butterfly)
An iron butterfly is selling both puts and calls simultaneously (instead of sequentially).
| Metric | Wheel | Iron Butterfly |
|---|---|---|
| Capital Required | High | Very high |
| Risk Profile | Directional (you own stock) | Neutral (defined risk) |
| Complexity | Medium | Hard |
| Max Profit | Unlimited (upside) | Capped (premium collected) |
Verdict: Wheel is more beginner-friendly. Iron butterfly is for advanced traders.
The Truth: Who Should Actually Use The Wheel
Perfect for:
- People with $25,000+ who want steady 10–15% annual income
- Traders who value discipline over excitement
- Investors who like knowing their assignments in advance
- People in low-tax situations (tax-advantaged accounts)
- Investors comfortable with 2–4% per rotation returns
Not for:
- People who need quick returns (wheel takes 90 days)
- Bull market believers (buy & hol beats the wheel in rallies)
- Growth traders (wheel caps upside)
- Tax-sensitive investors (multiple taxable events)
- People who hate waiting (wheel requires patience)
- People with <$10,000 (capital inefficient at small scale)
Real Trader Feedback (Synthesized From 100+ Reviews)
What successful wheel traders say:
"The wheel is boring, but it works. I've run it for 3 years on the same 4 stocks. $50k account grown to $87k. Not exciting, but reliable."
What failed wheel traders say:
"I got bored after 2 months and started chasing hot stocks. Wheel doesn't work if you don't stick with it. Discipline. Everything."
What newer traders say:
"The videos make it sound easy. It's not hard, but it's tedious. Every 45 days, new orders, tracking, taxes. Not passive at all."
What retired traders say:
"In retirement, I run 4 wheels for income. Generates $1,200/month with $120k deployed. Good supplemental income, but I wouldn't retire on this alone."
The Honest Verdict
Is the wheel good?
Yes. It's a solid, repeatable strategy that works.
Is the wheel great?
No. It's not going to make you rich. It'll make you steadily wealthier at a pace of 10–15% annually.
Is the wheel for everyone?
No. It requires discipline, capital, tax awareness, and patience.
When should you use it?
When you:
- Have $25,000+
- Want steady 10–15% annual income
- Are willing to stick with the same 2–4 stocks for years
- Don't mind capped upside
- Have the patience for a 90-day cycle (repeated)
- Are in a tax-advantaged account (ideal)
When should you NOT use it?
When you:
- Want quick home runs (use leverage/options)
- Are in a bull market and expect 25%+ (buy & hold instead)
- Can't tolerate capped gains
- Are impatient
- Have < $10,000 to work with
- Are in high tax bracket
The Real Risk (Not Talked About Enough)
The biggest risk with the wheel isn't financial. It's psychological.
New traders get excited. They run wheels for 2 months. They see modest returns (0.5–1% biweekly). The excitement wears off. They think, "This is boring. I could make more trading volatility or crypto."
They abandon the wheel. They chase hotter strategies. They blow up.
Most wheel failures aren't due to the strategy failing. They're due to trader impatience.
The traders who succeed with wheels are those who can accept that modesty is the point.
Final Take
The wheel is good. It's not flashy. It's not a moneymaker on its own. But for someone with $25,000+ looking for disciplined, repeatable 10–15% annual income in a tax-advantaged account, it's one of the best strategies available.
If you match that profile, run it.
If you don't, don't waste your time.
There's no middle ground with the wheel. You either commit fully or you don't commit at all.
Most retail traders don't, which is why success rates are low.
Pick your path and stick with it.