When option sellers talk about generating consistent monthly income, the wheel strategy stands out as one of the most reliable approaches. This real-world example demonstrates how a trader collected almost $500 in option premium on Marvell Technology (MRVL) in less than 30 days while maintaining zero capital gains exposure.
The beauty of this approach lies in its simplicity and tax efficiency. By entering and exiting the stock at the same price point, the trader avoided capital gains taxes entirely while pocketing substantial premium income. This article walks through the complete cycle from covered call assignment through position management to a new cash-secured put entry.
Whether you're new to the wheel strategy or looking to optimize your current approach, understanding how to track assignments, manage cost basis, and select new positions is essential for sustainable income generation.
The cycle began with a covered call position on Marvell Technology that expired on January 27th with a strike price of $40.50. During that week, MRVL experienced a strong upward movement, climbing from approximately $40 to $44.25 by Friday's close.
When MRVL closed above the $40.50 strike price, the covered call was automatically assigned. This meant the 100 shares were called away at exactly $40.50 per share, regardless of the stock trading at $44.25. Here's what that looks like:
Some traders might feel disappointed about "missing out" on the move from $40 to $44—a potential $400 gain on 100 shares. However, this perspective misses the fundamental principle of income-focused option selling.
Stock prices fluctuate constantly. That $4 unrealized gain could just as easily become an unrealized loss as the stock pulls back. The wheel strategy prioritizes collecting consistent premium regardless of whether the stock moves up, down, or sideways. The goal isn't to capture stock appreciation—it's to generate reliable cashflow from option premium.
Proper transaction tracking becomes critical when managing multiple positions and ensuring accurate cost basis calculations. The assignment process requires several steps to maintain clean records.
The trader navigated to the Cost Basis page and filtered down to the MRVL position. The expired covered call showed a last price of $44.24, confirming the assignment. Here's the step-by-step process:
After processing the assignment, the position summary revealed something remarkable: zero shares owned, zero capital appreciation, and almost $500 in collected premium.
This addresses a common concern among traders who worry about getting called out of their positions. If you enter and exit at the same price, there's no capital gain to tax. You simply collected premium along the way without any capital appreciation tax consequences.
The complete wheel cycle on MRVL generated approximately $500 in option premium in less than 30 days. This premium represents real profit that can be withdrawn and spent, reinvested into new positions, or compounded for larger future trades.
With the position closed and premium collected, the trader had two options: find a new stock to begin the wheel strategy, or continue with MRVL if it still meets the criteria. The decision was to continue with MRVL due to familiarity and confidence in the underlying stock.
Before entering a new position, the trader analyzed MRVL's recent price action. The stock had experienced approximately five to six consecutive green days, climbing from $40 to $44. This presented some considerations:
This didn't mean avoiding MRVL—it simply meant understanding that selling a cash-secured put at current levels would likely benefit from a pullback toward the strike price, increasing the premium value and improving entry odds.
The trader shared valuable insights about preferred stock price ranges for wheel strategy implementation:
Higher-priced stocks ($50-$150 range) do offer attractive premiums with wider strike price ranges (five to ten-dollar increments with decent premium). However, the increased exposure may not justify the additional premium for conservative income-focused traders.
The trader's preference for weekly options aligns with the cashflow-first mentality: collect premium early and often rather than waiting for monthly expirations.
Position Details for the New Trade:
An interesting observation: both the $44 put and the $44 call were trading with similar premium levels. This differs from situations where one side (usually the put side) commands significantly higher premium due to downtrend expectations.
In MRVL's case, with the stock in an uptrend, both sides offered roughly equivalent premium. This suggests balanced volatility expectations and makes either side of the wheel attractive for premium collection.
The trader noted an important lesson from a previous week: good-for-day orders can expire unfilled if the market opens higher and premium decreases. The solution is to monitor the order at market open and adjust the limit price to current market conditions if needed.
If MRVL opens higher on Monday, the $44 strike may be further out-of-the-money, reducing the premium below the $1.14 limit. In that case, canceling and replacing the order with an adjusted premium (and possibly adjusted strike) ensures execution rather than letting the order expire worthless.
Managing the wheel strategy across multiple positions requires meticulous tracking of cost basis, premium collected, assignments, and proposed records. MyATMM was built specifically to handle these complexities for option sellers.
This complete wheel strategy cycle on Marvell Technology demonstrates several important principles for sustainable option income generation:
Whether you're just starting with the wheel strategy or refining your existing approach, the combination of systematic position selection, accurate tracking, and consistent execution creates a reliable framework for monthly income generation.
Options trading involves substantial risk and is not suitable for all investors. Past performance does not guarantee future results. The examples shown in this article are for educational purposes only and should not be considered financial advice or a recommendation to buy or sell any security.
Option premium income is taxed as short-term capital gains in most situations. Always consult with a qualified tax professional and financial advisor before implementing any trading strategy. Never risk more capital than you can afford to lose.
This content is provided for educational and informational purposes only. MyATMM is a tracking platform and does not provide investment advice or recommendations.
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