The wheel strategy delivers consistent income through repeated cycles of selling cash-secured puts, accepting assignment when put in the money, selling covered calls on owned shares, and eventually exiting the position. Most tutorials focus on entering positions or managing individual legs, but the exit strategy determines whether theoretical premium collection translates into realized profits.
This article presents a complete wheel strategy case study on Bath & Body Works (BBWI) demonstrating how to achieve 6% to 8% returns in less than two months by systematically collecting premium from both cash-secured puts and covered calls, then exiting when the stock trades at or above cost basis to lock in profits without capital gains or losses.
The strategy involves selling options on both sides of a position simultaneously: covered calls on shares already owned while also selling cash-secured puts to potentially acquire more shares. When both option positions expire worthless, the trader keeps the premium from both sides and faces a decision point about whether to continue the wheel with new positions or exit the stock entirely to redeploy capital elsewhere.
The week began with two active option positions on BBWI: a covered call sold against 200 owned shares, and a cash-secured put that would obligate purchase of 100 additional shares if the stock declined below the strike price. Both options reached expiration on Friday March 22nd, and reviewing their outcomes provides the foundation for planning the next move.
The covered call consisted of two contracts sold on Monday March 18th with a strike price of $47 expiring Friday March 22nd. The trader placed the order Sunday evening March 17th with a limit of 35 cents per share, expecting the order to fill Monday morning at or near that price. The actual fill came through at 40 cents per share one minute after market open, generating $80 in premium for the position ($0.40 × 200 shares).
During the week, BBWI's stock price created an interesting situation by temporarily reaching $48, which would have triggered assignment and forced sale of the shares at the $47 strike. However, the stock pulled back below $47 before Friday's close, allowing the options to expire worthless. This meant the trader kept both the shares and the $80 premium, maintaining control of the position rather than being forced out through assignment.
The cash-secured put faced execution challenges that illustrate the importance of monitoring limit orders carefully. The trader placed an order Sunday evening March 17th for one contract at a $45 strike with a 45 cent limit. The order did not fill, and because the trader did not monitor it in time, the order expired at end of day Monday.
This required placing a new order Tuesday morning March 19th. Because the stock price had moved higher overnight, the at-the-money strike had shifted from $45 to $46. The new order targeted the $46 strike at a 44 cent limit, and this time the order filled within two seconds of submission, collecting $44 in premium ($0.44 × 100 shares).
By Friday's expiration, BBWI traded above the $46 strike, so the cash-secured put also expired worthless. This outcome meant the trader did not receive assignment of additional shares but kept the $44 premium collected when the position opened.
After identifying the executed trades from the brokerage platform, the workflow moves to recording each transaction in MyATMM's cost basis tracking system. This step ensures that all premium collected gets properly recorded and factored into the cost basis calculations that inform future strike selection decisions.
The covered call entry requires these specific details captured from the Think or Swim order history:
After entering these details in the draft section of MyATMM, clicking save moves the transaction into the covered calls section where it appears with all other call positions. At this point the position shows as active, and it will remain active until marked as expired or assigned.
The cash-secured put entry follows a similar process with these details:
Clicking save moves this transaction into the cash-secured puts section. At this point both positions show as active in MyATMM, matching the active status they had in the brokerage platform before Friday's expiration.
MyATMM automatically creates temporary draft entries in the transaction history section to help record the premium collection. These drafts include the premium amount and calculate appropriate commission based on the number of contracts. The trader reviews these entries against the brokerage account statement to verify accuracy, then adjusts fees if needed before saving to permanent transaction history.
For the covered call, the brokerage showed fees of $1.30 and 2 cents, so the MyATMM draft entry showing $1.30 and 2 cents matched exactly. For the cash-secured put, the brokerage showed fees of 65 cents and 2 cents, but the MyATMM draft showed 65 cents and 1 cent, requiring a one penny adjustment before saving.
With both transactions now recorded in the system and their premium collection logged in transaction history, the final step involves marking each option as expired since neither resulted in assignment. This step removes them from the active positions section and updates the overall position summary to reflect that these particular contracts have closed.
MyATMM provides an "Expired" action for each position in the calls and puts sections. Clicking this button for the covered call removes the two contracts from the active call positions. Clicking expired for the cash-secured put removes that one contract from active put positions. After marking both as expired, the position summary updates to show only the 200 shares that remain owned with no active option positions.
After recording both transactions, marking them as expired, and updating all entries to transaction history, the position summary reveals the key metrics that inform the exit decision. These numbers represent the complete financial picture of the BBWI wheel strategy cycle from initial entry through all premium collection to the current moment.
| Metric | Value | Meaning |
|---|---|---|
| Total Shares Owned | 200 | Current share count from assignments |
| Total Cost | $9,300 | Capital invested in acquiring shares |
| Stock Value | $9,350 | Current market value at $46.75 per share |
| Unrealized Gain | $50 | Paper profit from stock appreciation |
| Total Premium Collected | $813 | All option premium across all transactions |
| Cost Basis | $46.50 | Average cost per share from assignments |
| Current Stock Price | $46.75 | Market price at time of review |
The $46.50 cost basis results from purchasing 100 shares at $47 and another 100 shares at $46, creating an average of $46.50. Because the current stock price of $46.75 sits above this cost basis, the position shows a small $50 unrealized capital gain. This creates an opportunity to exit the position without realizing any taxable capital gains or losses, instead keeping the entire $813 in premium collected as the profit from this wheel strategy cycle.
The video reveals a calculation error that illustrates an important consideration for wheel strategy practitioners. The initial ROI calculation divided the $833 in total premium by the $9,300 invested in shares, yielding 8.7%. However, this calculation fails to account for the collateral tied up during the period when both cash-secured puts and covered calls ran simultaneously.
When selling cash-secured puts while also owning shares and selling covered calls, your total capital committed includes both the cost of the shares already owned plus the cash collateral reserved for potential put assignment. This means the true invested capital exceeded $9,300 during portions of the cycle, reducing the actual ROI somewhat below the 8.7% initially calculated.
Even with this more conservative calculation accounting for all collateral, the realized return ranges from 6% to 8% over less than 60 days of trading. This represents the power of the wheel strategy when executed with proper exit discipline: rather than hoping for maximum capital appreciation, the strategy focuses on consistent premium collection and strategic exits when the stock trades near cost basis.
With accurate position data available, the trader faces a decision: continue the wheel strategy by selling new covered calls and cash-secured puts on BBWI, or exit the position entirely to redeploy capital to a different ticker. Several factors support the decision to exit at this point in the cycle.
The current stock price of $46.75 trading above the $46.50 cost basis means selling shares at or above cost basis will exit without capital gains or losses. This preserves all the premium collected as pure profit from the wheel strategy. If the trader waits and the stock declines below cost basis again, exiting without capital losses becomes impossible until the stock recovers or enough additional premium is collected to bring the effective cost basis below the stock price.
The $9,300 invested in BBWI shares could be redeployed to a different ticker that offers better premium opportunities or more attractive risk/reward characteristics. Wheel strategy success depends not just on managing individual positions but on recognizing when to exit one opportunity to pursue another. By locking in 6-8% returns in under 60 days and freeing this capital, the trader can start a new wheel cycle on a different stock, potentially generating additional returns rather than remaining committed to BBWI.
The position served its purpose of demonstrating a complete wheel strategy cycle for educational content creation. Continuing the position indefinitely adds complexity without enhancing the educational value. Starting a fresh position on a different ticker provides new content opportunities while maintaining the systematic approach to wheel strategy execution.
After deciding to exit the BBWI position, the trader moves to Think or Swim to place a limit order to sell the 200 owned shares. The order structure balances the desire to exit at or above cost basis with realistic market conditions to increase the probability of execution.
The position summary shows a cost basis of $46.50, making this the minimum acceptable sale price to exit without capital losses. The market shows the last bid at $44.60 and last ask at $47.30, with the midpoint around $45.95. However, these end-of-day quotes reflect Friday's close and may not represent Monday's opening conditions.
Rather than trying to capture the midpoint or target a price above cost basis, the trader sets a conservative limit at exactly $46.50. This price represents the break-even point where selling the shares returns the full $9,300 invested, allowing the trader to keep all $813 in premium as profit without any offsetting capital gain or loss.
The complete order includes these specifications:
The good-for-day designation means the order will attempt execution only during Monday's trading session. If the stock trades at or above $46.50 at any point Monday, the order fills and the position closes. If the stock remains below $46.50 all day, the order expires unfilled and the trader must reassess whether to modify the strategy.
Limit orders execute at the limit price or better, meaning if BBWI opens Monday at $47.00, the order would fill at $47.00 rather than $46.50. This would generate a 50 cent per share capital gain ($100 total) in addition to the $813 in premium, increasing the total profit from the cycle. The limit simply prevents execution below the break-even point while allowing better prices if available.
If BBWI experiences a significant decline Monday and trades well below $46.50 all day, the order will not fill. In this scenario, the trader would need to decide whether to hold the shares and sell new covered calls while potentially also selling new cash-secured puts, or lower the exit price to sell at a small capital loss offset by the premium already collected. The decision would depend on whether the stock shows signs of recovery or appears to be entering a prolonged decline.
The transaction history in MyATMM reveals that the BBWI position started in early February, making the current exit attempt in late March represent approximately 60 days of trading activity. This timeframe provides important context for evaluating the 6-8% return that exiting at cost basis would generate.
While annualizing short-term trading returns can be misleading, the calculation illustrates the power of the wheel strategy when executed with proper discipline. A 7% return in 60 days represents approximately 42% annualized if that rate could be sustained (7% × 6 two-month periods per year).
Of course, actual annualized returns depend on finding quality wheel strategy candidates consistently, managing assignments and expirations efficiently, and recognizing optimal exit points across multiple cycles. Not every two-month cycle will produce 7% returns. However, this example demonstrates that systematic wheel strategy execution focusing on premium collection and strategic exits can generate meaningful returns on capital significantly faster than buy-and-hold strategies.
The entire BBWI position ran in a paper trading account, meaning the profits remain theoretical rather than realized cash. However, paper trading reflects real market prices and order execution that would occur in a funded account. The strategies, order types, premium collection amounts, and position management decisions all represent what a real trader could execute with actual capital.
Paper trading serves several important purposes for wheel strategy practitioners: testing new ticker selections before committing real money, demonstrating educational concepts without risking capital, and maintaining systematic practice during market conditions where funded trading might be paused. The discipline of recording every transaction, calculating accurate cost basis, and making strategic decisions based on real market data translates directly to funded account trading.
If Monday's trading session closes without the limit order filling because BBWI remained below $46.50 all day, the trader must decide between several continuation strategies. Each approach carries different risk profiles and return potentials.
The most conservative continuation strategy involves selling new covered calls against the 200 owned shares at a strike at or above the $46.50 cost basis. This approach continues generating premium while maintaining a hard floor against assignment below break-even. If assigned, the shares sell at or above cost basis, achieving the same outcome as the original exit plan while collecting additional premium during the waiting period.
The downside to this approach is that if the stock remains below $46.50 for an extended period, covered call premiums at the $46.50 or higher strikes may become minimal. Weekly expirations might produce only pennies per share in premium when selling significantly out-of-the-money strikes, reducing the income generation that makes the wheel strategy attractive.
A more aggressive continuation strategy sells covered calls at strikes below the $46.50 cost basis to collect more attractive premiums available closer to the current stock price. This increases immediate income but creates assignment risk that would realize a small capital loss.
For example, selling covered calls at a $46 strike might collect 20-30 cents per share rather than the 1-2 cents available at the $46.50 strike. However, if assigned at $46, the 50 cent per share capital loss ($100 total) would reduce the overall profit from $813 in premium to $713. Whether this tradeoff makes sense depends on the probability of assignment and the attractiveness of the premium collected.
Another continuation approach combines covered calls on owned shares with new cash-secured puts at strikes below the current price. This bilateral strategy collects premium from both sides while increasing share count through additional assignments if the stock continues declining.
This approach works best when the trader believes the stock represents good value at current or lower prices and wants to accumulate more shares while collecting premium. The risk is that continued decline could result in a larger position showing unrealized losses that take significant time and premium collection to overcome.
This complete wheel strategy case study from initial assignment through exit planning demonstrates several critical principles for option sellers pursuing consistent income generation.
Many wheel strategy discussions focus heavily on entry and position management while treating exits as an afterthought. This case study shows that recognizing optimal exit points represents a critical skill that separates systematic traders from those who hold positions indefinitely hoping for maximum gains. When the stock trades at or above cost basis after collecting substantial premium, exiting locks in realized returns and frees capital for the next opportunity.
The video's honest acknowledgment of the ROI calculation error provides an important lesson: when running bilateral strategies with both covered calls and cash-secured puts simultaneously, total capital committed includes both the cost of owned shares plus cash collateral for potential put assignments. Accurate return calculations require accounting for all tied-up capital, not just the cost basis of currently owned shares.
The position showing a small $50 unrealized capital gain creates an optimal exit environment where selling at cost basis preserves all premium as profit without capital gains taxes. Wheel strategy practitioners should watch for these opportunities when stock price crosses above cost basis, as they represent clean exit points that maximize after-tax returns.
Achieving 6-8% returns in 60 days demonstrates that wheel strategy profits compound not through capital appreciation but through rapid cycling across multiple positions. The faster you recognize optimal exits and redeploy capital to new opportunities, the more cycles you complete per year, and the higher your annualized returns become. A trader completing six complete cycles per year at 6-7% each generates better annual returns than one holding the same position all year hoping for 15-20% appreciation.
While paper trading cannot replicate the emotional aspects of risking real capital, it provides valuable practice in systematic transaction recording, accurate cost basis calculation, and strategic decision making based on market data. The discipline of treating paper positions with the same rigor as funded positions translates directly to real trading success.
This case study demonstrates how accurate cost basis tracking directly enables profitable exit decisions. Without knowing the precise cost basis including all premium collected, determining whether to exit, continue, or adjust positions becomes guesswork rather than data-driven strategy.
MyATMM's position summary immediately showed that BBWI traded above cost basis with substantial premium collected, highlighting the exit opportunity. Brokerage platforms typically show only the average cost per share from stock purchases without adjusting for option premium collected, making it difficult to identify these optimal exit points without manual calculations.
The complete transaction history recorded in MyATMM provided the data needed to calculate time in trade (approximately 60 days), which contextualized the 6-8% return and enabled meaningful ROI comparisons. Without systematic transaction recording, determining exactly when positions started and calculating accurate duration becomes challenging, especially when managing multiple tickers simultaneously.
Seeing the total premium collected ($813) alongside the unrealized stock gain ($50) made clear that option premium represented the overwhelming majority of the position's profitability. This insight supports the exit decision by showing that continued capital appreciation contributes relatively little compared to the premium already captured, suggesting that redeploying capital to a new wheel cycle offers better return potential than waiting for additional BBWI appreciation.
The BBWI wheel strategy case study demonstrates that consistent returns come not from finding the perfect stock or hoping for maximum capital appreciation, but from executing complete strategy cycles with proper entry discipline, systematic premium collection, and strategic exits that lock in realized profits.
By achieving 6-8% returns in approximately 60 days through combined cash-secured put and covered call premium collection, then recognizing the exit opportunity when the stock traded above cost basis, this cycle illustrates the power of treating the wheel strategy as a business rather than a speculative position. The profit comes not from the $50 in stock appreciation but from the $813 in premium systematically collected through repeated option sales.
For traders implementing the wheel strategy, three principles emerge from this case study: First, exit strategy matters as much as entry strategy, and recognizing when to take profits and redeploy capital separates consistent traders from those who hold indefinitely. Second, accurate cost basis tracking including all premium collected provides the data needed for strategic exit decisions. Third, completing multiple cycles per year through strategic exits and redeployment generates better returns than holding single positions hoping for large capital gains.
Whether you're considering your first wheel strategy position or managing multiple tickers systematically, the discipline of recording every transaction, calculating accurate cost basis with premium, and making data-driven exit decisions determines your long-term success in option selling.
Options trading involves significant risk and is not suitable for all investors. Selling cash-secured puts obligates you to purchase shares at the strike price if assigned, potentially resulting in losses if the stock declines. Covered calls cap your upside potential and do not protect against downside risk beyond the premium received.
The wheel strategy can result in holding positions showing unrealized losses for extended periods, and exiting before collecting sufficient premium to offset capital losses will realize those losses. Past performance of specific trades does not guarantee future results.
This content describes a paper trading example for educational purposes only and should not be considered financial advice or a recommendation to trade any specific security or implement any particular strategy. Always conduct thorough research and consider consulting with a qualified financial advisor before implementing option strategies with real capital.
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