Unit 2 · Level 2 · Covered calls & cash-secured puts
The wheel
The 'wheel' chains the last two lessons into a loop: sell cash-secured puts until you're assigned shares, then sell covered calls on those shares until they're called away, then start again. Every turn collects premium. Sounds like a perpetual income machine, and in sideways markets it does grind out returns. But the wheel has no magic: it's long stock with the tails sold off, and it underperforms exactly when markets move big.
Free to play. No ads, no token, no account needed to start.
What you get asked
Put one full turn of the wheel in order
Put premium on the way in, call premium on the way out. Each turn of the wheel is just the two strategies you already know, welded into a loop.
Match the market regime to how the wheel performs
The wheel harvests premium in calm and pays for it at the extremes. No strategy performs in every regime. This one's regime is 'boring'.
In a monster bull year, why does the wheel usually underperform buy-and-hold?
Each call caps that month's rally, and the stock gets called away just as momentum builds. Big yearly returns often come from a handful of huge months, and the wheel sells those.
In a crash, the wheel's put leg assigns you shares that keep ___.
The premium cushions a euro or two of the drop; the rest is yours. The wheel does not remove equity risk. It just pre-commits you to buying dips, including the ones that keep dipping.
What is the wheel, stripped of its branding?
You're long the stock's middle and short its extremes. Perfectly legitimate, as long as you know that's the bet and don't mistake premium for protection. 🐜
The rest of this unit
Renting out shares and getting paid to bid: income strategies, priced honestly.