The Wheel Strategy
A continuous income cycle that generates premium at every stage — whether you hold crypto or cash. Sell calls when you own it. Sell puts when you don't. Keep the wheel turning.
Phase 1: You hold crypto
Sell covered calls at multiple strikes above spot. Collect premium on every leg. If calls are exercised, your crypto is sold at your chosen price — and you move to Phase 2.
Phase 2: You hold cash
Sell cash-secured puts at strikes below spot. Collect premium while waiting to re-enter. If puts are exercised, you buy crypto back at your chosen price — and return to Phase 1.
The cycle repeats
Every transition generates premium. You are never idle — you are always collecting income, whether the market goes up, sideways, or down. The wheel keeps turning.
The Wheel cycle — multiple strikes
Hold 3 BTC
Sell 3 covered calls at 3 different strikes
Hold cash
Sell 3 cash-secured puts at 3 different strikes
Hold 3 BTC again
Sell 3 covered calls. Cycle restarts.
Premium collected at every stage — calls, puts, and every transition in between.
Full Wheel mechanics
The Wheel with multiple strikes is more sophisticated than the basic version. You spread your calls (and later your puts) across different strikes, so partial exercise is the norm — not all-or-nothing. Here is exactly how each phase works.
Start: Sell covered calls
You hold crypto (e.g. 3 BTC). You sell one covered call per BTC at three different strikes — spreading your exposure across the range. Each call collects premium immediately.
Example
You hold 3 BTC at $60,000. You sell: 1 call at $63,000 strike, 1 call at $65,000 strike, 1 call at $68,000 strike. All three expire in 30 days. You collect premium on all three upfront.
One call exercised → 2 calls + 1 put
BTC rallies past your lowest strike ($63,000). That 1 BTC gets called away at $63,000. You now hold 2 BTC. Next month: sell 2 covered calls on your remaining BTC, and sell 1 cash-secured put to try to buy back the BTC you lost — at a price you choose.
Example
Month 2: Sell 2 covered calls on your 2 remaining BTC. Sell 1 cash-secured put at $61,000 (below current spot) — you collect put premium and, if exercised, buy 1 BTC back at $61,000. You are earning income on all three legs.
All three calls exercised → 3 puts
BTC surges past all three strikes. All 3 BTC get called away. You are now in cash. Next month: sell 3 cash-secured puts at strikes below current spot. You collect premium on all three and aim to buy back your BTC position at lower prices.
Example
Month 2: Sell 3 cash-secured puts — e.g. at $62,000, $60,000, and $58,000. You collect premium on all three. If exercised, you buy BTC back at those levels. If not exercised, you keep the premium and sell 3 more puts next month.
Puts exercised → back to covered calls
Your puts get exercised and you acquire BTC again — at the strike prices you chose, funded by the cash from the called-away BTC plus all the premiums collected along the way. You now hold crypto again and return to Phase 1: sell covered calls. The wheel turns.
Example
Your 3 puts are exercised. You buy 3 BTC at your chosen strikes. Your effective cost basis is lower than spot because of all the premiums collected. You immediately sell 3 covered calls. The cycle restarts.
Key insight: By spreading across multiple strikes, you are never fully in or fully out. Partial exercise is the normal outcome — you transition gradually between phases, always collecting premium on every active leg. The wheel does not stop turning just because one strike gets hit.
How the Wheel performs in different markets
The Wheel is designed to generate income in any market condition — but the outcomes differ. Understanding each scenario helps you set realistic expectations.
Sideways market
Best caseBTC trades in a range. Your calls expire worthless every month. You keep all the premium and your full BTC position. You repeat the cycle indefinitely, compounding income without ever losing your crypto.
Income profile
Maximum — full premium every cycle
Gradual bull market
Good caseBTC rises slowly. Some calls get exercised at your chosen strikes — you sell BTC at prices you agreed to upfront, collect the premium, then use puts to buy back lower. You participate in the trend while collecting income throughout.
Income profile
Premium + capital gains on called-away BTC
Sharp rally
Capped upsideBTC spikes 30% in a week. All your calls get exercised. You miss the gains above your strikes. You are now in cash, selling puts to re-enter. You still collected all the premiums — but you underperform a pure long position in a sharp move.
Income profile
Premium only — missed the rally above strikes
Bear market
Managed downsideBTC falls 40%. Your calls expire worthless (good — you keep premium). Your puts get exercised and you buy BTC at your chosen strikes — which are now above the falling market price. You are underwater on the position, but the premiums collected reduce your effective cost basis throughout.
Income profile
Premium collected, but unrealised loss on position
Risks of the Wheel on crypto
The Wheel is one of the lower-risk options strategies — but lower risk is not no risk. Crypto's volatility adds dimensions that do not exist in equity wheel trading. Every risk below comes with a concrete mitigation.
Capped upside on sharp rallies
MediumWhen BTC surges past all your call strikes, your entire position gets called away. You miss all gains above the highest strike. In a 50% rally, a pure long holder doubles their money — a wheel trader collects premium and misses most of the move.
Mitigation
Set your highest strike at a level that represents a genuinely satisfying exit price. If BTC at $68,000 is a price you are happy to sell at, being called away there is not a failure — it is the strategy working.
Put assignment in a falling market
HighIf BTC falls sharply after your calls are exercised, your cash-secured puts get exercised and you buy BTC at your chosen strikes — which may now be above the current market price. You are acquiring an asset that is falling. The premium collected reduces your cost basis but does not eliminate the loss.
Mitigation
Only run the Wheel on crypto you are genuinely happy to hold long-term at the strike prices you choose. Never sell puts at strikes you would not be comfortable owning at. The Wheel is not a strategy for assets you are uncertain about.
Capital tied up in cash-secured puts
MediumCash-secured puts require you to hold enough cash to buy the crypto if assigned. When you are running 3 puts, that cash is locked and cannot be deployed elsewhere. In a rising market, this represents an opportunity cost.
Mitigation
Size your put positions so the required cash reserve is a planned allocation, not your entire capital. Keep a portion of capital free for other opportunities or emergencies.
Crypto volatility spikes mid-cycle
HighCrypto can move 20–40% in days. A sudden spike can push all your calls deep in-the-money simultaneously, forcing a decision on all three legs at once. A sudden crash can push all your puts in-the-money, requiring you to buy a falling asset across all three strikes.
Mitigation
Spread your strikes across a range rather than clustering them together. Use the Yield Scanner to check implied volatility before entering — high IV means higher premiums but also higher probability of exercise. Have a rolling plan ready before you enter.
Execution risk across multiple legs
MediumRunning 3 calls or 3 puts simultaneously means 3 separate positions to monitor, roll, and manage at expiry. Missed management on one leg can create an unintended position. On Deribit, all options are European-style (exercised at expiry only), which reduces surprise — but you still need to be attentive.
Mitigation
Use Deribit's combination order book to manage multiple legs efficiently. Set calendar reminders for expiry dates. The dashboard's Positions & P&L tab is designed to track multi-leg positions across the full cycle.
Choosing the wrong strikes
HighStrikes too close to spot maximise premium but maximise the chance of exercise. Strikes too far from spot generate negligible income. The wrong balance means either your position gets called away constantly (missing rallies) or you collect so little premium the strategy is not worth the complexity.
Mitigation
Use the Yield Scanner to find strikes with a meaningful APR at a buffer you are comfortable with. A 5–10% OTM strike on a 30-day expiry is a common starting point. Adjust based on your view of the market and your income targets.
Platform and counterparty risk
MediumAll positions are held on Deribit, a centralised exchange. Your funds are exposed to exchange risk — hacks, insolvency, or regulatory action. Running a multi-leg strategy with cash reserves on the platform increases your exposure.
Mitigation
Only keep on the exchange what you need for active positions. Withdraw profits regularly. Deribit holds client funds in cold storage, but no centralised exchange is risk-free.
Tax complexity
MediumThe Wheel generates multiple taxable events per cycle: premium received on each call, premium received on each put, and potential capital gains or losses when crypto is called away or acquired. Across 3 legs per month, this adds up quickly.
Mitigation
Keep detailed records of every leg: entry date, strike, expiry, premium received, and any buyback cost. Consult a tax professional familiar with crypto derivatives. Consider using accounting software that supports options trades.
Glossary of terms
Every term you will encounter when running the Wheel on crypto options.
Ready to run the Wheel?
Use the live Yield Scanner to find your call and put strikes, and the Positions & P&L tracker to manage all your legs across the full cycle.