The Crypto Options Wheel: Cash-Secured Puts and Covered Calls
Summary
The options wheel combines selling cash-secured puts with selling covered calls on an asset received through put assignment. A trader first reserves enough cash to buy the underlying at the put strike. If the put expires out of the money, the trader may sell another put; if assigned, they hold the crypto and can write a covered call against it. An unassigned call leaves the trader holding the asset, while assignment sells it at the call strike and frees capital to restart the put stage.
The article recommends choosing an asset the trader is willing to hold and setting strikes according to desired entry price and risk tolerance. Premium income can accrue across repeated cycles, but it is not assured or necessarily profitable: a sharp decline can leave the trader holding a depreciated asset, and a covered call caps gains above its strike. Assignment can also tie up capital. The guide is introductory and does not quantify returns, fees, liquidity, volatility exposure, or option Greeks, so its examples do not establish a reliable passive-income outcome.
Key ideas
- The wheel alternates between cash-secured puts and covered calls as assignment changes what the trader holds.
- A put writer reserves cash and may be assigned the underlying at the strike price.
- A covered call can generate premium but limits gains above the call strike if the asset rallies.
- The strategy is most suited to assets the trader is willing and able to hold through a downturn.
- Premium collection does not remove downside risk, capital constraints, or the effects of options pricing and fees.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.