The continuous wheel strategy transforms traditional option selling from a one-directional approach into a systematic income engine that generates premium whether the underlying stock moves up, down, or sideways. By simultaneously selling covered calls against owned shares and cash-secured puts below current market price, option sellers collect premium on both sides of the market while systematically reducing their average cost basis through multiple assignments at progressively lower prices.
This article demonstrates a complete weekly workflow for implementing the continuous wheel on Bitcoin ETF BITO, including the critical transition point where a cash-secured put expires worthless instead of being assigned. That transition represents a key milestone in the strategy: when price rises above your put strike, you collect the premium without adding shares, generating pure income while maintaining the flexibility to sell another put the following week.
The demonstration walks through reviewing transactions in ThinkOrSwim paper trading account, transferring data to MyATMM cost basis tracking platform, analyzing position metrics after rolling covered calls down from $30 to $29 strike, and selecting new strikes for the upcoming expiration cycle based on premium-adjusted cost basis calculations.
The traditional wheel strategy follows a linear path: sell cash-secured puts until assigned, then sell covered calls until assigned, completing the cycle. The continuous wheel modifies this approach by selling cash-secured puts even while you own shares and are selling covered calls, creating multiple income streams that accelerate cost basis reduction.
When you own 600 shares of BITO acquired through previous cash-secured put assignments, you face a choice. The traditional approach would involve only selling covered calls against those 600 shares, waiting for assignment to exit the position, then starting over with new cash-secured puts.
The continuous wheel approach recognizes that you have sufficient capital to sell additional cash-secured puts below current market price while simultaneously selling covered calls against your existing shares. This generates premium from both strategies concurrently:
This dual-sided approach significantly increases weekly premium collection compared to single-strategy implementation. In the demonstration, the trader collects premium from rolling five covered call contracts and creating one new contract, plus premium from one cash-secured put contract, all in the same week.
The continuous wheel excels in declining or sideways markets where repeated cash-secured put assignments occur at progressively lower prices. Each assignment adds shares at a lower cost, pulling down the average cost basis for the entire position and creating opportunities to roll covered calls to lower strikes.
The demonstration reveals that the trader has been "following the price down and getting assigned all the way down" through multiple weeks of cash-secured put sales. Each assignment at prices like $27, $26, $25, and eventually down to current levels near $23 systematically reduces the blended cost basis, transforming what appears to be an underwater position into one with manageable recovery potential.
This dollar cost averaging effect becomes particularly powerful when combined with premium collection. Not only are you acquiring shares at lower prices, but you're being paid premium to do so, creating a double benefit that accelerates cost basis reduction.
The demonstration highlights a critical transition point: the week when a cash-secured put expires worthless rather than being assigned. This occurs when price rises back above the strike during the week, resulting in the option expiring out of the money.
The specific transaction shows a cash-secured put sold at $25.50 strike collecting $0.50 premium. When price rose back above $25.50 before expiration, the put expired worthless, allowing the trader to keep the entire $50 premium without taking assignment. This represents "free $50 bucks" that required no further action and no capital deployment.
This balance between assignments (which add shares) and expirations (which generate pure income) creates the ideal continuous wheel dynamic: accumulate shares during decline, collect pure premium during recovery, maintain both covered calls and cash-secured puts throughout.
The weekly workflow begins by logging into ThinkOrSwim paper trading account and navigating to the account statement section to review executed transactions from the previous week. The demonstration shows three key transactions that require recording in MyATMM cost basis tracking system.
The account statement reveals the following executed orders:
These three transactions demonstrate the typical continuous wheel activity: managing existing covered call positions through rolls as cost basis changes, adding new covered call contracts as needed, and tracking cash-secured put outcomes whether assigned or expired.
The demonstration shows the trader's preferred method for recording rolled positions: creating two new position entries rather than trying to modify the existing entries. This approach maintains cleaner records and avoids potential confusion about which transactions relate to which positions.
The first new position records the five-contract roll with these details:
After saving, MyATMM moves this position into the covered calls group and generates a proposed transaction showing $60 credit ($0.12 × 100 shares × 5 contracts) minus $6.50 in commissions and $0.07 in fees. The commission is higher for rolls because it includes fees for both the buy side (closing old position) and sell side (opening new position).
The second covered call transaction represents selling one new contract at the $29 strike to bring total contracts to six. This entry includes:
The proposed transaction shows $30 credit minus $0.65 commission and $0.02 in fees. After clicking the helper button to pre-calculate and save, both covered call positions now appear in the active calls group with June 7th expiration.
The cash-secured put position requires different handling since it expired worthless rather than being assigned. The demonstration shows first entering the initial transaction details:
After saving, the position appears in the active puts group with proposed transaction showing $50 credit minus $0.65 commission and $0.02 fees. Saving that transaction locks in the premium collected.
Since May 17th has now passed and the option expired worthless, the position needs to be removed from the board. The demonstration shows simply clicking to remove this expired position, cleaning up the display to show only active positions with future expirations.
After recording all transactions, MyATMM displays comprehensive position metrics that reveal the current state of the BITO position and inform strike selection for the upcoming week. Understanding these metrics separates systematic option sellers from those who make decisions based on intuition rather than data.
| Metric | Value | Meaning |
|---|---|---|
| Total Shares | 600 | Position size built through six separate cash-secured put assignments |
| Total Cost | $17,400 | Aggregate capital deployed across all assignments at various strike prices |
| Current Value | $16,332 | Market value based on last trading price (approximately $27.22 per share) |
| Unrealized Loss | $1,068 | Paper loss before accounting for premium collected |
| Total Premium | $1,328 | Net option income collected from all covered calls and cash-secured puts after commissions |
| Average Cost Basis | $29.00 | Per-share average from all stock assignments |
| Net Position | +$260 | Overall profit if liquidating entire position at current market price |
The critical insight from these metrics reveals that despite showing an unrealized loss of $1,068 on the stock position itself, the total premium collected of $1,328 more than offsets this loss, resulting in a net gain of $260 if the entire position were liquidated immediately.
This demonstrates the fundamental power of the wheel strategy: systematic premium collection transforms underwater positions into profitable ones over time. Even when stock price declines, consistent premium income provides downside protection and accelerates the path to profitability.
The $29.00 average cost basis reflects the six separate assignments that built this position. Through dollar cost averaging, each assignment at progressively lower prices (likely starting in the low $30s and working down to current levels in the mid-to-high $20s) reduced the blended average, creating the current $29.00 per-share cost.
The demonstration notes that the strategy will continue until one of two outcomes occurs:
Outcome A: Cost basis reduces to a level where the trader can sell covered calls at an attractive strike and get assigned, closing the position with profit. For example, if cost basis drops to $25 through continued assignments and premium collection, selling $26 or $27 covered calls would generate both premium income and potential capital gains if assigned.
Outcome B: Price rises above the $29 cost basis and stays there long enough for the covered calls to be assigned, closing the entire position at the strike price. This would result in selling the 600 shares at $29, breaking even on stock cost while keeping all $1,328 in collected premium as pure profit.
Both outcomes represent successful strategy completion. The continuous wheel doesn't depend on predicting which outcome occurs, but rather systematically works toward both possibilities simultaneously through ongoing premium collection and cost basis management.
With the $29.00 cost basis now documented and six covered call contracts active at the $29 strike with June 7th expiration, the demonstration addresses an important decision point: whether to continue rolling these contracts or let them ride until expiration.
The reason the trader rolled covered calls from $32 down to $31, then to $30, and finally to $29 over previous weeks relates directly to cost basis changes. Each time new cash-secured put assignments occurred at lower prices, the average cost basis decreased, creating an opportunity to roll covered calls down to a lower strike while collecting additional premium from the roll transaction.
For example, when cost basis dropped from $32 to $31 due to a new assignment, the trader could roll the $32 covered calls down to $31, collecting premium from the roll while maintaining strikes at or near cost basis. This rolling process continued as cost basis systematically decreased through dollar cost averaging.
In the current week, no new stock assignments occurred because the cash-secured put expired worthless instead of being assigned. This means the cost basis remained at $29.00, exactly matching the current covered call strike.
Since the strike already matches cost basis and the expiration is still three weeks away (June 7th), no rolling action makes sense this week. The demonstration explicitly states the plan to "just keep them in play the way they are" and only look for a new cash-secured put position.
This highlights an important continuous wheel principle: not every week requires action on every position type. Sometimes covered calls simply run their course toward expiration while the trader focuses on the cash-secured put side. This reduces transaction costs and avoids unnecessary trading activity.
The demonstration notes that rolling will resume if either of two conditions occurs:
Condition 1: Cost basis decreases - If new cash-secured put assignments occur at lower prices before June 7th, pulling average cost down below $29, then rolling the covered calls from $29 down to $28 or $27 would make sense to capture the unused extrinsic value and maintain strikes near cost basis.
Condition 2: Approaching expiration - When June 7th gets closer (perhaps with one week remaining), if the calls are still out of the money, the trader will evaluate whether to let them expire and sell new calls at the same or different strike, or roll them forward to a later expiration to collect more premium.
This dynamic management approach optimizes premium collection while maintaining appropriate strike selection relative to cost basis, creating the systematic framework that drives long-term wheel strategy success.
With covered call positions established and no action needed this week, the workflow proceeds to evaluating cash-secured put opportunities for the upcoming Friday expiration. This represents the continuous aspect of the strategy: consistently selling new puts to play both sides of the market while building position size through assignments at attractive prices.
The demonstration shows navigating to the ThinkOrSwim analyze tab and selecting BITO with the upcoming Friday expiration (5 days out). With the current trade price at approximately $27.22, the at-the-money strike sits at the $27 level.
The option chain reveals premium of $0.56 cents at the bid side for the $27 strike. Using the mark price (midpoint between bid and ask), the demonstration calculates potential premium of $0.58 per share for this one-week contract.
The trader demonstrates examining premium not just for the immediate weekly expiration but also looking ahead to subsequent weeks to understand how premium builds over time. This provides context for deciding whether to take the immediate weekly premium or potentially go out to a monthly expiration for larger premium collection.
The analysis shows premiums for the $27 strike across several expirations, though the demonstration notes some apparent data inconsistencies in the option chain (likely due to low liquidity or market data delays in the paper trading environment). Despite these display quirks, the trader focuses on the near-term weekly expiration as the target.
Selecting the $27 strike when the stock trades at $27.22 represents an at-the-money approach that balances two competing objectives:
Assignment probability - At-the-money strikes have roughly 50% probability of finishing in the money, creating reasonable likelihood of assignment if that's desired. Given that the trader wants to continue building position size and reducing cost basis through additional assignments, this probability level is appropriate.
Premium collection - At-the-money strikes typically offer the highest premium per dollar of risk compared to out-of-the-money strikes. While selling the $25 or $26 put would reduce assignment risk, it would also significantly reduce premium collected. The $27 strike optimizes the premium-to-risk relationship.
If assigned at the $27 strike, the new shares would add to the position at a price below the current $29 cost basis, further reducing the average and creating additional opportunities to roll covered calls lower while collecting premium.
The demonstration shows left-clicking on the bid price for the $27 strike, which generates an order template. The trader then adjusts the premium from the $0.56 bid up to the $0.58 mark price to improve fill probability, sets quantity to 1 contract, and clicks confirm and send to queue the order.
This order will sit in working orders until market open on the next trading day. If the mark price remains at $0.58 or higher, the order should fill at market open. If volatility changes overnight or the stock gaps up or down, the premium may adjust, potentially requiring order modification to achieve a fill.
Once filled, this cash-secured put will add to the active puts group in MyATMM, where it will be tracked through the week until either assignment (if price drops below $27) or expiration (if price stays above $27). Either outcome generates income and advances the continuous wheel strategy toward the ultimate goals of cost basis reduction and systematic premium collection.
Before concluding the weekly workflow, the demonstration includes a critical verification step: confirming that MyATMM's calculated account total exactly matches the balance shown in the ThinkOrSwim brokerage account. This reconciliation ensures that all transactions have been recorded correctly and the cost basis calculations reflect accurate data.
The trader navigates back to the MyATMM dashboard to view the overall summary, which displays the brokerage account total calculated by MyATMM based on all recorded transactions. The dashboard shows a total of $84,928.49.
Switching back to the ThinkOrSwim account view, the demonstration confirms the account balance displays exactly $84,928.49, matching MyATMM's calculation to the penny.
This exact match proves that all transactions have been entered correctly, all commissions and fees have been accounted for, and the cost basis calculations reflect the true state of the account. When these numbers match, the trader can have complete confidence in the premium-adjusted cost basis figures and position metrics used to make strike selection decisions.
If the MyATMM total did not match the broker balance, it would indicate one of several potential issues:
When mismatches occur, the trader must review recent transactions in both the broker and MyATMM to identify the discrepancy, correct the error, and restore balance. This reconciliation process ensures data integrity and maintains accurate cost basis tracking over time.
Taking 30 seconds each week to verify account balance reconciliation prevents small errors from accumulating into larger problems that could result in incorrect strike selection decisions or flawed performance analysis. This systematic verification represents the difference between casual option trading and professional systematic execution.
With balances confirmed to match exactly, the trader can proceed with confidence knowing that the $29 cost basis, $1,328 in total premium collected, and net $260 overall gain reflect accurate data that can be trusted for making the next week's trading decisions.
The demonstration reveals several strategic advantages that make BITO an attractive underlying for continuous wheel implementation, particularly compared to traditional equity options.
BITO offers weekly option expirations, allowing traders to implement the continuous wheel on a weekly cycle rather than being limited to monthly expirations. This creates several benefits:
The weekly cycle demonstrated in this workflow shows premium collection of approximately $0.50 to $0.60 per week on cash-secured puts at the $27 strike. Annualizing this (52 weeks × average $0.55) suggests potential for $28.60 in annual premium per share just from the put side, representing over 10% return on the strike price.
BITO tracks Bitcoin futures, which experience significantly higher volatility than most equity underlyings. This volatility translates directly into higher option premiums, making both covered calls and cash-secured puts more attractive from an income generation perspective.
The demonstration shows collecting meaningful weekly premium even during a period when BITO has declined substantially from highs. In high-volatility environments, weekly premium can reach $1.00 or more per share on at-the-money strikes, creating exceptional income generation potential for position sizes of several hundred or thousand shares.
With BITO trading in the $20 to $30 range during the demonstration period, the capital requirement for cash-secured puts remains manageable. Selling one cash-secured put at the $27 strike requires $2,700 in capital (100 shares × $27), allowing traders with moderate account sizes to sell multiple contracts and build meaningful positions.
Contrast this with selling cash-secured puts on high-priced stocks like Amazon (often $100+) or Tesla (frequently $200+), which require $10,000 to $20,000+ in capital per contract. BITO's lower price point democratizes the wheel strategy for traders without six-figure accounts.
The continuous wheel's two-sided approach (covered calls on owned shares plus cash-secured puts below market) generates premium income regardless of market direction:
This market-direction-agnostic approach creates consistent income streams that compound over time through systematic execution regardless of whether you correctly predict short-term price movement.
While the continuous wheel creates systematic income, several challenges can emerge during implementation. Understanding these challenges and having predetermined responses prevents emotional decision-making during market volatility.
The demonstration reveals that the trader has been "following the price down and getting assigned all the way down" over multiple weeks. This represents the most common continuous wheel challenge: when price declines rapidly, weekly cash-secured puts continue to get assigned, building position size faster than planned.
Response Strategy: Predetermined position size limits prevent overconcentration. Before starting the strategy, decide maximum share count you're willing to own (perhaps 1000 shares for a $25,000 account). Once you approach that limit, stop selling cash-secured puts and focus exclusively on covered call premium collection while position recovers.
The demonstration shows 600 shares owned, which at $27 represents approximately $16,200 in capital deployed. If the trader's account size is $84,928 (as shown), this represents only 19% concentration in BITO, leaving substantial capital for other positions or additional BITO accumulation if desired.
The covered call analysis reveals that selling at the $29 strike (matching cost basis) generates minimal premium, making some traders reluctant to continue the strategy. When at-the-money premium is insufficient, the temptation emerges to either skip covered call sales or sell strikes well below cost basis to capture more premium.
Response Strategy: Accept that low premium periods will occur, particularly after volatility declines following rapid price movements. Selling covered calls at cost basis for even $0.05 to $0.15 per share per week still generates meaningful annual returns (5-15% annualized) with zero assignment risk. Avoid selling strikes below cost basis unless you genuinely want to exit the position if assigned.
Bitcoin's 24/7 trading nature means BITO can experience significant overnight price gaps that skip through strikes, potentially creating assignment situations that wouldn't occur with normal intraday price movement. Weekend gaps present particular risk.
Response Strategy: Understand that some assignments will occur due to gaps rather than gradual price movement. This is inherent to BITO's underlying asset. If this risk feels uncomfortable, consider selling strikes further out of the money to provide gap protection, accepting lower premium as the tradeoff for reduced gap assignment probability.
As the demonstration shows, simultaneously managing six covered call contracts plus ongoing cash-secured puts across multiple expirations creates tracking complexity that can lead to missed transactions or incorrect cost basis calculations if done manually.
Response Strategy: Use dedicated tracking software like MyATMM to maintain systematic records of all transactions, automatic cost basis calculations, and reconciliation with broker balances. The few dollars per month for tracking software is easily offset by preventing a single calculation error that could result in selling strikes below true cost basis and locking in losses.
The continuous wheel strategy demonstrated on BITO illustrates how systematic option selling generates consistent weekly premium income regardless of market direction, while simultaneously reducing cost basis through dollar cost averaging when assignments occur at progressively lower prices.
This strategy performs best in specific market conditions:
The demonstration reveals a position that has been built over multiple weeks through systematic execution, resulting in 600 shares with $29 cost basis, $1,328 in collected premium, and net $260 overall gain despite unrealized loss on the stock position itself.
This illustrates the fundamental continuous wheel principle: systematic premium collection over time transforms underwater positions into profitable ones through consistent execution of the defined process. By playing both sides of the market simultaneously and maintaining accurate cost basis tracking, option sellers create repeatable income streams that don't depend on correctly predicting short-term price direction.
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, which can result in substantial losses if the underlying declines significantly. The continuous wheel strategy can result in rapid accumulation of large positions during market declines, potentially exceeding intended position sizes and creating concentration risk.
BITO is subject to unique risks associated with Bitcoin futures markets, including extreme volatility, potential tracking error versus spot Bitcoin prices, contango impact from monthly futures rolls, regulatory uncertainty, and weekend price gaps that can result in unexpected assignments. Bitcoin prices can decline rapidly and substantially, causing corresponding declines in BITO that may exceed premium collected.
Covered calls cap upside potential and provide only limited downside protection equal to premium received. During rapid declines, covered call premium may not offset losses on the underlying shares. Cost basis tracking software provides data organization tools but does not constitute investment advice, recommendations, or guarantees of profitability.
Past performance, including premium amounts shown in demonstrations, does not guarantee future results. All trading decisions and their consequences remain your sole responsibility. This content is for educational purposes only and should not be considered financial advice. Consult with a qualified financial advisor before implementing any options strategy.
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