The continuous wheel strategy transforms Bitcoin ETF volatility into consistent cashflow by simultaneously collecting premium on both sides of current price action. This demonstration shows how selling one covered call against existing shares while selling one cash-secured put below market price generated $184 in combined premium ($91 call, $93 put) representing a 2.8% return on the $6,500 in collateral involved in both transactions over a single week.
What makes this approach particularly effective for BITO is how it handles the inevitable assignment events that occur when Bitcoin experiences its characteristic volatility swings. When the cash-secured put expired in the money and generated an assignment of 100 additional shares, the position didn't become a problem requiring defensive action. Instead, it became an opportunity to scale up and sell two covered call contracts in the following week while placing another cash-secured put at an even lower strike price, continuing the premium collection cycle with increased position size.
This article walks through the complete workflow from placing the initial bilateral trades through recording assignment transactions in MyATMM, analyzing updated cost basis metrics after assignment, and scaling to multiple contracts as position size grows. You will learn how assignments accelerate the wheel strategy rather than disrupting it, and how systematic transaction tracking converts raw broker data into actionable intelligence that informs every subsequent trade decision.
Before examining the specific trades, understanding the market context that created this premium collection opportunity provides important perspective on strike selection and risk management for Bitcoin ETF option trading.
The ThinkOrSwim chart analysis reveals BITO had been experiencing significant volatility in the weeks leading up to this trade. Price action showed multiple sharp moves in both directions, creating the elevated implied volatility that generates attractive option premiums for sellers. This volatility environment makes BITO particularly suitable for bilateral premium collection since movement in either direction creates profitable scenarios.
At the time of the trades, BITO was trading around $29.28 as the last executed price. This represented a position roughly in the middle of recent range, neither at significant support nor resistance levels that might indicate imminent directional breakout. This neutral positioning supports the bilateral approach of selling both calls and puts, collecting premium regardless of which direction the stock moves.
Bitcoin ETF BITO offers several characteristics that make it attractive for systematic wheel strategy implementation:
These characteristics combine to create an underlying that generates consistent premium income for option sellers while providing the dividend income that many Bitcoin direct holdings lack. The monthly dividend becomes particularly valuable when you accumulate significant share position through multiple assignments.
With BITO at $29.28 and existing 100 shares owned from a previous assignment at $32 per share, the setup involved identifying appropriate strikes for both the covered call and cash-secured put that balanced premium collection with acceptable assignment risk at each strike.
The existing position with $32 cost basis meant selling covered calls below that level carried assignment risk that would realize a loss on those 100 shares, though partially offset by premium collected. However, with sufficient premium already collected from previous trades, the effective cost basis including all premium sat lower, providing flexibility in strike selection.
The initial trades placed on April 8th demonstrate the practical implementation of bilateral premium collection on BITO with one-week expiration targeting April 12th.
The covered call order was placed with a limit price of $0.29 at the $32 strike price. This strike selection positioned the call exactly at the original acquisition cost for the 100 shares owned, meaning assignment at $32 would break even on the stock position itself while keeping all premium collected from both the covered call and any previous trades.
When market opened the following morning, BITO had jumped higher overnight, causing the option premium to spike significantly. The order filled at $0.91 per share instead of the $0.29 limit, generating $91 in total premium compared to the expected $29. This represents more than 3x the anticipated premium due to the overnight gap up in the underlying stock price.
This fill demonstrates an important principle: limit orders placed above market price at the time of entry provide protection against unfavorable fills while capturing beneficial price improvements when they occur. The $0.29 limit set a floor for acceptable premium, but the actual $0.91 fill captured the increased value created by the overnight move.
The original plan called for placing a cash-secured put at $29.50 strike with limit of $0.29 premium, creating a symmetric bilateral structure around the $29.28 current price. However, the same overnight gap that improved the covered call fill also created a problem for the cash-secured put: with the stock jumping higher at market open, the $29.50 strike premium also increased substantially, but that strike now sat much closer to the current price, increasing assignment probability.
Rather than accepting this increased assignment risk, the put order was cancelled and replaced with a $31.50 strike put with $0.94 limit price. This adjustment moved the strike higher to account for the higher stock price while maintaining similar out-of-the-money distance as the original plan intended. The order filled at $0.93, generating $93 in premium.
This adaptive approach illustrates practical trade management: when market conditions change between order placement and execution, adjusting strikes and limits to maintain the intended risk profile matters more than rigidly following the original plan. The goal is appropriate strike placement relative to current price, not specific strike numbers.
The two transactions generated combined premium:
| Transaction | Strike | Premium | Collateral |
|---|---|---|---|
| Covered Call | $32.00 | $91.00 | 100 shares owned |
| Cash-Secured Put | $31.50 | $93.00 | $3,150 cash reserved |
| Total | - | $184.00 | $6,350 combined |
The $184 in combined premium against $6,350 in total collateral represents 2.8% return on the capital involved in these transactions over the one-week holding period. Annualized, this would represent extraordinary returns, though sustainability at this rate depends on consistent premium availability and appropriate risk management.
After executing the trades, the systematic tracking workflow begins by transferring broker transaction data into MyATMM for comprehensive cost basis calculation and position management.
Recording the covered call requires entering all relevant transaction details from the ThinkOrSwim account statement:
After entering these details and clicking Save, MyATMM moves the position into the active calls group and automatically generates a proposed transaction record showing the $91 credit minus $0.67 in total commissions and fees for a net credit of $90.33. Using the helper function calculates this net automatically before saving to permanent transaction history.
The cash-secured put follows identical recording process with its specific values:
After saving, this position moves to the active puts group and generates its proposed transaction record. The net credit after commissions comes to $92.33, bringing total net premium from both transactions to $182.66 after accounting for all costs.
A critical step after recording transactions involves verifying that MyATMM's calculated account balance matches the broker's actual account value. The demonstration shows checking this reconciliation by comparing the brokerage value displayed on the MyATMM dashboard ($98,558) against the ThinkOrSwim account balance ($98,558), confirming perfect match.
This balance verification serves as quality control that all transactions were entered correctly with proper amounts, dates, and fee structures. When the calculated balance matches broker balance, you have confidence that all data is accurate and cost basis calculations reflect reality.
When Friday April 12th arrived, BITO closed at $29.28, positioning the $32 covered call well out of the money (expired worthless) while the $31.50 cash-secured put finished in the money (resulting in assignment). This outcome demonstrates the typical wheel strategy assignment scenario where puts get assigned during downward price movement.
The $32 strike covered call expired worthless since the stock never reached that level during the week. This represents the ideal outcome for covered call sellers: keep the entire $91 premium without assignment, retain the 100 shares, and prepare to sell another covered call for the following week. The position is simply marked as expired in MyATMM and removed from active positions.
The $31.50 put expired in the money, obligating the put seller to purchase 100 shares at the $31.50 strike price. The ThinkOrSwim transaction history shows this assignment processed on Saturday April 13th with the notation "Removal of option due to assignment" followed by "Bought 100 BITO @ $31.50."
Recording this assignment in MyATMM requires clicking the assign button on the active put position and entering assignment details:
After clicking submit, MyATMM automatically generates a stock purchase transaction record for $3,150 (100 shares × $31.50) and updates all position metrics to reflect the new 200-share total position. Importantly, stock assignments typically carry no commissions or fees, so the transaction records simply the $3,150 stock cost.
The assignment immediately impacts position cost basis calculations. Before assignment, the position consisted of 100 shares purchased at $32. After assignment, the position holds 200 shares with blended cost:
The assignment reduced the average cost basis by $0.25 per share through dollar cost averaging at a lower price. This demonstrates how assignments at progressively lower strikes systematically reduce overall position cost, improving the economics even during downward price trends.
After recording the assignment and updating all transactions, MyATMM displays comprehensive position metrics that reveal the complete economic picture of the BITO position including all premium collected and all shares owned.
| Metric | Value | Meaning |
|---|---|---|
| Total Shares | 200 | Accumulated through two separate assignments |
| Total Stock Cost | $6,350 | Capital deployed acquiring shares ($3,200 + $3,150) |
| Current Stock Value | $5,856 | Market value at $29.28 per share |
| Unrealized Loss | $494 | Paper loss before accounting for premium |
| Total Premium Collected | $367.99 | Net option income from all transactions |
| Average Cost Basis | $31.75 | Blended per-share cost from assignments |
| Cost Basis with Premium | $29.91 | Effective cost after subtracting premium collected |
The critical insight from these metrics comes from comparing the $31.75 average cost basis to the $29.91 premium-adjusted cost basis. The $1.84 per share difference represents the $367.99 in total premium collected across all option trades, which fundamentally changes the position economics.
With the stock currently at $29.28, your unrealized loss based on stock cost alone would be $494 ($31.75 cost basis minus $29.28 current price times 200 shares). However, when you factor in the $367.99 premium collected, the true economic loss reduces to approximately $126, representing the difference between $6,350 invested and current value of $5,856 plus $367.99 premium for total value of $6,223.99.
This $29.91 premium-adjusted cost basis also reveals that the current $29.28 stock price sits only $0.63 below breakeven. The position needs just a 2.1% stock price recovery to reach full breakeven, compared to the 8.5% recovery that would be required based on the $31.75 stock cost basis alone.
The two assignments at $32.00 and $31.50 represent systematic dollar cost averaging in action. Each assignment at a lower strike price reduced the overall position cost, improving economics despite the stock trading lower. This process continues as you sell additional cash-secured puts at progressively lower strikes during downtrends, accumulating shares at increasingly attractive prices while collecting premium on every transaction.
As the demonstration notes, this approach means you never realize losses until you actually sell shares. While shares are held, the paper losses represent opportunity cost but not actual economic loss. Meanwhile, premium collection continues on both covered calls and cash-secured puts, systematically reducing the effective cost basis and moving closer to breakeven or profitability even if the stock remains range-bound.
With 200 shares now owned after the cash-secured put assignment, the position can support two covered call contracts instead of the single contract sold previously. This scaling represents a key advantage of the wheel strategy: as assignments build position size, covered call income scales proportionally without requiring additional capital deployment.
The analysis begins by examining covered call opportunities for the upcoming weekly expiration. With the cost basis now at $31.75 per share, the $32 strike represents the closest strike at or above cost basis, making it the natural starting point for strike evaluation.
Reviewing the $32 strike premiums across multiple expirations reveals interesting patterns:
The doubling of premium when extending from 5 days to 12 days creates a decision point. Normally, weekly options provide the best return per day of time commitment since theta decay accelerates in the final week. However, when you can collect more than double the premium by extending just one additional week, the mathematics favor the longer expiration.
The demonstration shows selecting the 12-day option at $0.59 mark, setting a limit order for $0.62 per share (slightly above the mark to attempt to capture a favorable fill). With two contracts, this targets $124 in total premium if both contracts fill at the $0.62 limit ($0.62 × 100 shares × 2 contracts).
The trader notes this unusual premium jump in the second week likely relates to upcoming dividend ex-date or increased volatility expectations due to geopolitical events affecting cryptocurrency markets. Bitcoin had experienced significant selling pressure over the previous weekend, potentially related to escalating Middle East tensions, creating elevated implied volatility that increased option premiums across all expirations.
This observation highlights the importance of examining multiple expirations rather than automatically selling the nearest weekly. Market conditions sometimes create better risk-adjusted returns at slightly extended expirations, and capturing these opportunities requires looking beyond default assumptions about optimal expiration selection.
BITO pays monthly dividends, with the next ex-date falling on May 1st, several weeks after the covered call expiration being considered. The trader notes that if selling covered calls that extend past an ex-dividend date, you need to ensure sufficient extrinsic value remains in the option to discourage early exercise.
The rule of thumb mentioned is maintaining at least $0.10 in extrinsic value (time value) to make early exercise economically unfavorable for the option buyer. As long as significant time value remains, option holders typically won't exercise early even when the option is in the money on ex-dividend date, allowing you to capture both the dividend and the option premium.
For the trades being placed with expiration well before the May 1st ex-date, this consideration doesn't apply, but it becomes relevant for any covered calls extending into late April or early May.
After placing the covered call orders, the workflow continues with evaluating cash-secured put opportunities at the current market price to continue bilateral premium collection and potentially add more shares through assignment at even lower strikes.
With BITO trading around $29.28, the $29 strike represents the closest at-the-money option for cash-secured put selling. The option chain shows this strike offering $0.86 bid to $0.95 ask with $0.89 mark for the weekly expiration.
The trader performs quick premium math to verify reasonable pricing: doubling the $0.86 weekly premium would give $1.72 for two weeks, but the actual two-week premium shows $1.30, indicating the weekly expiration offers better value per day. This confirms the standard pattern where weekly options typically provide optimal theta decay capture.
The decision is made to place one cash-secured put contract at the $29 strike with limit at $0.89 (the mark price), targeting $89 in premium for the week. If assigned, this would add another 100 shares at $29, further reducing the average cost basis through continued dollar cost averaging.
An interesting observation from the demonstration addresses why only one contract is being sold rather than multiple contracts. With 200 shares currently owned, selling two cash-secured put contracts would potentially add 200 more shares if both assigned, doubling the position to 400 shares and significantly impacting the cost basis through the large acquisition at the lower $29 price.
For demonstration and conservative capital management purposes, the trader chooses to sell only one contract. However, the principle is acknowledged: if you want to aggressively build position size and reduce cost basis quickly, matching your cash-secured put contracts to your current share count (or even exceeding it) makes mathematical sense if you have the capital available and believe in the underlying long-term.
This flexibility in position sizing represents another advantage of the wheel strategy: you control how quickly you build position size through your cash-secured put contract selection, allowing you to scale capital deployment based on available funds and conviction level.
After placing both orders, the working orders section shows:
These orders will execute when market opens, and the cycle continues: collect premium, track transactions, handle any assignments, update cost basis, and place the next round of covered calls and cash-secured puts based on updated position metrics.
Before concluding the workflow, the demonstration shows performing final account reconciliation to ensure all recorded transactions match the broker's actual account state. This quality control step catches any data entry errors before they compound into larger tracking problems.
The MyATMM dashboard displays the brokerage value at $95,424, representing the current account balance after all transactions have been recorded. Comparing this against the ThinkOrSwim account balance shows exact match at $95,424, confirming that all transactions were entered correctly with proper amounts, fees, and dates.
This perfect balance match provides confidence that:
The dashboard also shows that $367.99 in total premium has been collected for April through all recorded transactions. This running total provides immediate visibility into monthly income generation, making it easy to track whether you're meeting income targets and how premium collection compares across different time periods.
For tax planning purposes, this premium tracking also provides the foundation for year-end reporting since every premium credit represents taxable income that must be reported, while every commission and fee represents a deductible expense that reduces taxable income.
The demonstration emphasizes that this reconciliation step should occur every time you record transactions, not just weekly or monthly. Catching errors immediately after data entry makes corrections simple, while letting errors accumulate over weeks can make it nearly impossible to identify where the mismatch occurred.
This systematic approach to reconciliation represents the difference between spreadsheet tracking (where errors compound silently) and purpose-built tracking software that maintains running balance calculations you can verify against broker statements at every step.
The continuous wheel strategy on BITO demonstrates how systematic bilateral premium collection combined with assignment-based position building creates consistent cashflow generation that adapts to market conditions rather than depending on directional predictions.
The 2.8% return demonstrated in this example represents strong weekly performance, but several factors affect sustainability:
Conservative estimates might target 0.5% to 1.0% weekly returns on deployed capital, which would still annualize to extraordinary returns if sustained. The key is maintaining realistic expectations while executing systematic strategy implementation rather than chasing unsustainable premium levels.
As the demonstration shows, the wheel strategy naturally scales as position builds:
This linear scaling means larger positions generate proportionally larger income without requiring increasingly complex management. The same strike analysis and transaction recording workflow handles 1 contract or 10 contracts with identical effort.
Several scenarios may require strategy adjustments:
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 security declines significantly. Covered calls cap your upside potential and provide only limited downside protection equal to the premium received.
BITO is subject to the risks associated with Bitcoin and Bitcoin futures markets, including extreme volatility, liquidity risk, regulatory risk, and tracking error. Bitcoin prices can decline rapidly and substantially, causing corresponding declines in BITO that could result in significant losses on both the stock position and any cash-secured puts that result in assignment.
The 2.8% return shown in this demonstration represents specific market conditions and option premiums available at that time. Future results will vary based on market volatility, strike selection, and execution timing. Past performance does not guarantee future results.
This content is 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 consult with a qualified financial advisor before making investment decisions.
MyATMM automatically calculates premium-adjusted cost basis, tracks every assignment, and maintains complete transaction history for systematic wheel strategy implementation on BITO or any underlying.
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