Selling Covered Calls on AAPL: Using Cost Basis to Pick Your Strike Price

Introduction: Why Your Cost Basis Determines Your Strike Price

When you're running the wheel strategy on a stock like Apple (AAPL) and you've been assigned shares, the very next decision you need to make is where to sell your covered call. Picking the wrong strike price can wipe out the premium you've already collected or lock you into a losing position.

This is Part 3 of our 4-part AAPL wheel strategy series. In the previous videos, we sold a cash-secured put on Apple and then handled the assignment when the stock dropped below our strike. Now it's time to sell a covered call on those assigned shares, and the key to doing it right is understanding exactly where your cost basis sits.

In this walkthrough, we'll cover how to read your cost basis to determine the minimum strike price for your covered call, how to execute both a covered call and a cash-secured put simultaneously to double your premium collection, and how to track everything in MyATMM so you always know where you stand.

Using Cost Basis to Select Your Covered Call Strike

Before opening your broker and placing any trades, you need to know your numbers. This is where most option sellers either get it right or unknowingly set themselves up for a loss. Your cost basis tells you the minimum strike price you need to sell at to avoid giving back the premium you've already collected.

Two Approaches to Strike Selection

There are two ways to think about your strike price, and which one you choose depends on your goal for the position.

The difference between these two numbers represents the premium you've already banked. In our AAPL example, the gap was small ($270 vs. $267), but on other positions where you've collected more premium over multiple cycles, the spread can be significant.

Selling the Covered Call on AAPL

Armed with our cost basis numbers, we headed over to Thinkorswim to place the trade. Since our cost basis without premium was $270, we chose to sell the covered call right at the $270 strike. This keeps things simple: if AAPL stays above $270 and we get called out, we keep all of our collected premium and exit the position with no loss on the stock.

One benefit of selling at-the-money or slightly in-the-money is that you'll collect more premium than if you sold further out of the money. Since the $270 strike was already slightly in-the-money at the time of the trade, we were able to collect $3.55 per share ($355 per contract) for a weekly expiration.

Premium Cash Flow vs. Capital Gains

This is an important distinction. If your strategy is focused on collecting option premium as cash flow, selling at-the-money or slightly in-the-money makes sense. You collect more premium, and your goal is to get in and out as quickly as possible.

If you're also looking for capital gains on the stock (meaning you want the stock price to rise and profit from that appreciation), you'd sell further out of the money. That gives the stock room to run up while you still collect some premium on top.

Neither approach is wrong. It depends entirely on what you're optimizing for. In this series, we're focused purely on premium cash flow.

Doubling Your Premium: Playing Both Sides

Here's where the continuous wheel strategy gets interesting. After selling the covered call, we turned right around and sold a cash-secured put on AAPL at the same $270 strike price. This means we're now collecting premium on both sides of the position simultaneously.

How the Outcomes Play Out

With both positions open, here's what happens at expiration depending on where AAPL lands:

• AAPL goes above $270: You get called out on your shares (covered call is exercised). The cash-secured put expires worthless. You keep premium from both contracts and exit the stock position clean.
• AAPL stays at $270: Both options are at-the-money and likely expire worthless or very close to it. You keep your shares and most or all of the premium from both contracts.
• AAPL drops below $270: The covered call expires worthless (you keep that premium). The cash-secured put may get assigned, meaning you'd buy another 100 shares. You keep both premiums, but now you own 200 shares and can sell two covered calls next cycle.

Tracking Both Transactions in MyATMM

After placing both trades in the broker, the next step is recording them in MyATMM so our cost basis and premium tracking stays accurate. We had already tracked the initial cash-secured put and the assignment in previous videos, so now we needed to add two new positions.

Recording the Covered Call

From the cost basis screen with AAPL selected, we clicked "New Position" and entered the details: sell to open, call, one contract, $270 strike, expiring that Friday, at a price of $3.55. After clicking save, the position moved into the Calls group automatically.

The transaction staging area pulled in our default commission settings (50 cents and a penny), and after clicking the helper button to pre-calculate the premium, we added it to the permanent transaction history.

Recording the Cash-Secured Put

Same process: new position, sell to open, put, one contract, $270 strike, same expiration, at a price of $2.19. Save moved it into the Puts group, and the staging area pre-populated with our defaults again. One click to pre-calculate, one click to add to transaction history.

The Running Summary

At this point, our AAPL position summary in MyATMM showed:

• 4 total transactions: Initial cash-secured put, assignment, covered call, and second cash-secured put
• 100 shares owned at a purchase price of $27,000
• $27,000 in additional collateral for the new cash-secured put
• $843 in total credits collected across all transactions
• Updated cost basis reflecting all premium collected to date

Why Accurate Cost Basis Tracking Matters for the Wheel

The wheel strategy isn't a set-it-and-forget-it approach. Every transaction changes your cost basis, and your cost basis directly determines which strike prices are profitable and which ones put you underwater.

Consider what happens without proper tracking: you sell a covered call at a strike that feels right, but it's actually below your effective cost basis including all the premium adjustments. If you get called out, you've locked in a net loss even though you thought you were profitable. That's the kind of mistake that compounds over multiple cycles.

With a tool like MyATMM, this information is always one click away. You don't have to dig through spreadsheets or calculate it manually. The cost basis screen shows you both numbers (with and without premium) so you can make an informed strike selection every time.

What's Next: Part 4 - The Final Results

In the next and final video of this AAPL wheel strategy series, we'll close the loop on this entire position. We'll see whether AAPL went above $270 and we got called out, or whether the stock dropped and we got assigned again on the put side. Most importantly, we'll walk through the overall profit and loss for the entire wheel cycle from start to finish.

That's the real payoff: seeing all the individual transactions roll up into a complete picture of how much premium cash flow the wheel strategy generated on a single ticker over multiple weeks.