1. What is the Wheel Strategy?

The Wheel Strategy is a popular options trading approach that involves selling cash-secured puts and covered calls to generate income. It's called "The Wheel" because traders cycle between these two strategies.

2. How Does the Calculator Work?

The calculator uses the simple profit formula:

Where:

• Premium Collected — The income received from selling options contracts
• Commissions — The fees paid to your broker for the trades

Explanation: This calculation helps traders understand their net profit after accounting for trading costs.

3. Importance of Profit Calculation

Details: Accurate profit calculation is crucial for evaluating strategy performance, managing risk, and making informed trading decisions.

4. Using the Calculator

Tips: Enter the total premium collected from your options sales and the total commissions paid. Both values should be in dollars.

5. Frequently Asked Questions (FAQ)

Q1: What is a typical commission rate?
A: Commission rates vary by broker but are typically $0.50-$1.00 per contract plus exchange fees.

Q2: Should I include assignment fees?
A: Yes, any fees related to the wheel strategy (including assignment fees) should be included in the commission total.

Q3: What about margin requirements?
A: This calculator focuses on cash-secured positions. Margin requirements aren't included in this basic calculation.

Q4: How often should I calculate profits?
A: Track profits for each complete cycle (put sale through call assignment) and also monitor monthly/quarterly performance.

Q5: What's a good profit target?
A: Targets vary, but many aim for 2-5% return on capital at risk per cycle, adjusted for time and volatility.