If you've been looking for a way to generate income from stocks you already like, the options wheel is one of the simplest strategies to learn. It's not complicated, and it's not a get-rich-quick play. It's a repeating process that pays you at more than one step along the way.Here's how it works.<h2 id="8f239517-043a-45df-a320-e44d6efe4fc6" data-toc-id="8f239517-043a-45df-a320-e44d6efe4fc6" class="text-text-100 mt-3 -mb-1 text-[1.125rem] font-bold" style="text-align: left; font-size: 24px; line-height: 1.2;">The Wheel: Four Steps</h2>Step 1 — Sell a Cash-Secured PutYou start by selling a cash-secured put. In plain terms, you're getting paid to agree to buy a stock at a price you choose. If the stock never drops to that price, you keep the money and move on.Step 2 — Get Assigned the SharesIf the stock does drop to your price, you get assigned the shares. You end up buying at a discount, because you already collected the premium from step one.Step 3 — Sell a Covered CallNow that you own the shares, you sell a covered call. This time, you're getting paid to agree to sell those shares at a higher price.Step 4 — Shares Called Away, RepeatIf the stock rises to that higher price, your shares get called away and you walk away with a profit. You're back to cash, and you can start the wheel again.<h2 id="a07b54c9-fbcb-4c77-b178-d973e9864685" data-toc-id="a07b54c9-fbcb-4c77-b178-d973e9864685" class="text-text-100 mt-3 -mb-1 text-[1.125rem] font-bold" style="text-align: left; font-size: 24px; line-height: 1.2;">One Full Turn, In Real Numbers</h2>Let's look at how this plays out on a $50 stock.<ul class="[li_&amp;]:mb-0 [li_&amp;]:mt-1 [li_&amp;]:gap-1 [&amp;:not(:last-child)_ul]:pb-1 [&amp;:not(:last-child)_ol]:pb-1 list-disc flex flex-col gap-1 pl-8 mb-3"><li class="font-claude-response-body whitespace-normal break-words pl-2">Sell a $47 put and collect $150.</li><li class="font-claude-response-body whitespace-normal break-words pl-2">The stock dips, so you buy 100 shares.</li><li class="font-claude-response-body whitespace-normal break-words pl-2">Sell a $50 call and collect another $130.</li><li class="font-claude-response-body whitespace-normal break-words pl-2">The stock rises, and your shares sell for $5,000.</li></ul>Add it up, and that's $580 on one full turn of the wheel.<h2 id="ec29d4ee-dd59-4115-887d-39ba91dd87f4" data-toc-id="ec29d4ee-dd59-4115-887d-39ba91dd87f4" class="text-text-100 mt-3 -mb-1 text-[1.125rem] font-bold" style="text-align: left; font-size: 24px; line-height: 1.2;">The One Rule That Matters Most</h2>The wheel only works if you follow one rule: only wheel stocks you'd be glad to own. If you wouldn't want to hold the shares at your chosen price, don't sell the put. The strategy is built to work in your favor at every step, but only if you're comfortable owning the stock if it gets assigned to you.Manage. Grow. Protect. That's the approach behind everything we teach here at <a target="_blank" href="http://MikePairMoney.com">MikePairMoney.com</a>.<hr>Want to learn more about building income strategies like this one? Check out our Wealth Building track for a deeper walkthrough of options income strategies.<div data-youtube-video="" style="display: flex; justify-content: flex-start;"><iframe src="https://www.youtube.com/embed/4IJix5b6I7M" start="0" width="640" height="480" frameborder="0" allowfullscreen="true" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" style="max-width: 100%; text-align: left;"></iframe></div>

The Options Wheel: A Simple Way to Get Paid Twice on the Same Stock

Market recaps, trading insights, and personal finance guides from Mike Pair. New posts every week covering personal finance, wealth building, insurance, and retirement.

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The Options Wheel: A Simple Way to Get Paid Twice on the Same Stock

The Options Wheel: A Simple Way to Get Paid Twice on the Same Stock

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