Cash-secured put assignments are often viewed by new option sellers as failures or mistakes to be avoided. However, in the continuous wheel strategy, assignments serve as strategic position entries at predetermined prices where you want to own the underlying stock. Each assignment converts option premium into share ownership while immediately creating new covered call inventory to continue generating income.
This comprehensive walkthrough demonstrates managing the sixth assignment on a BITO Bitcoin ETF position, showing the complete workflow for recording transactions, processing assignments, updating cost basis calculations, reconciling account balances, and making strategic decisions about future positions. You will learn the systematic process for tracking every component of the wheel strategy including option premium, assignment costs, commissions, and how these integrate into true cost basis that reveals your actual breakeven price.
The tutorial provides real transaction data from a paper trading account running the continuous wheel on BITO, documenting how repeated assignments at progressively lower strikes create dollar cost averaging that reduces the average cost per share. With BITO declining from initial assignments around $32 down to the current $27.50 assignment, the position demonstrates both the challenge of holding through declines and the strategic advantage of accumulating shares at lower prices while collecting premium on both covered calls and cash-secured puts.
Understanding the complete assignment workflow ensures accurate record keeping and reveals the true economics of each position. The process begins with option expiration, proceeds through assignment notification, requires proper transaction recording, and concludes with planning the next positions on newly acquired shares.
The weekly workflow begins by examining the brokerage account statement to identify which transactions executed during the previous week. For the period covered in this video, the account shows three distinct transaction groups:
Cash-Secured Put Sold:
The transaction history shows this order was submitted at a $1.22 limit price but actually filled at $1.68, providing an extra $0.46 per share beyond the expected premium. This favorable fill occurred because the market moved in your favor between order submission and execution, demonstrating why limit orders often fill at better prices than requested when order flow allows.
Covered Calls That Failed to Execute:
The video reveals an important oversight: covered call orders placed on Monday April 29 did not execute that day. The trader was not monitoring the account that Monday and discovered the next day (Tuesday April 30) that the orders had expired unfilled. This required resubmitting the covered call orders on Tuesday, which then filled at different premium amounts than the original Monday orders would have collected.
This real-world mistake demonstrates why monitoring orders on submission day matters, particularly for options on volatile underlying securities where premiums can change significantly in 24 hours. The lesson: either monitor orders actively on submission day or use Good-Till-Canceled orders that remain working until manually canceled.
Recording transactions in a dedicated tracking system like MyATMM creates the permanent record needed for accurate cost basis calculations. The cash-secured put recording includes:
After clicking save, the application adds this position to the "Puts" section showing it as an active position. The system also generates a proposed transaction showing the total credit ($168) minus commissions and fees for net credit of $167.33. Moving this proposed transaction to permanent transaction history completes the recording and ensures the premium will be included in all future cost basis calculations.
The video shows recording both new covered call contracts and rolled covered call positions. For demonstration purposes, the trader consolidated what was actually a roll (buying back old contracts and selling new ones) into a single new position entry showing just the net premium collected from the roll.
New Covered Call on Recently Assigned Shares:
Rolled Covered Calls (Consolidated Entry):
The video demonstrates an important technique for handling rolls: rather than recording the buy-to-close and sell-to-open as separate transactions, you can record just the new sold position showing only the net premium collected. This simplifies tracking when you are primarily interested in how much additional premium the roll generated rather than the detailed mechanics of the two-legged trade.
When the cash-secured put expires in-the-money (stock price below strike at expiration), assignment occurs and you acquire 100 shares per contract at the strike price. Processing assignment in your tracking system requires several steps:
Assignment Notification:
The broker's account statement shows the assignment as a new transaction typically dated the Monday after Friday expiration (settlement date). In this case, the May 3 Friday expiration resulted in May 4 assignment showing:
Recording Assignment in MyATMM:
To record the assignment, locate the cash-secured put position in the active positions list, click the result dropdown, and select "Assigned." The interface expands to show assignment details:
Clicking submit processes the assignment and adds a new stock position to the "Stocks" section showing 100 shares acquired at $27.50. The cash-secured put position is marked as assigned and removed from active option positions since it has been fulfilled through share delivery.
CRITICAL STEP: After processing assignment, you must save the new stock position to permanent transaction history. The video shows the trader initially forgetting this step and later having to correct it during account reconciliation. Save immediately after processing assignment to avoid this oversight.
After recording all transactions and processing the assignment, MyATMM displays updated position metrics showing the complete state of your BITO position:
| Position Component | Before Assignment | After Assignment |
|---|---|---|
| Total Shares Owned | 400 | 500 |
| Covered Call Contracts | 4 (400 shares covered) | 4 (400 shares covered, 100 uncovered) |
| Average Cost Basis (assignments only) | Higher (fewer lower-priced assignments averaged in) | $29.70 (includes the new $27.50 assignment) |
| Cost Basis With Premium | Higher (less total premium collected) | $27.76 (includes the $167.33 put premium) |
The assignment reduces the overall cost basis because the $27.50 acquisition price is below the previous average. This demonstrates the dollar cost averaging effect: each lower assignment improves the overall position average even though earlier assignments show unrealized losses.
The most critical metric for option sellers running the wheel strategy is not the stock's current price but your true cost basis including all premium collected. This calculation reveals your actual breakeven price and determines which covered call strikes eliminate assignment risk while still generating acceptable premium.
MyATMM tracks two distinct cost basis calculations that serve different strategic purposes:
Assignment Cost Basis: $29.70
This metric calculates the simple average of all stock assignments without considering premium collected. For this position built through six assignments at $32.00, $31.50, $29.00, $28.50, $27.00, and now $27.50, the assignment cost basis reflects the weighted average purchase price of shares.
The calculation: (100 shares × $32 + 100 × $31.50 + 100 × $29 + 100 × $28.50 + 100 × $27 + 100 × $27.50) ÷ 500 shares = $29.70 per share
This is the cost basis your broker would report for tax purposes and represents the actual capital deployed to acquire the shares. If you sold all 500 shares at $29.70, you would breakeven on share purchases but would have collected all the option premium as profit.
Cost Basis With Premium: $27.76
This critical metric represents your true economic cost by subtracting all collected premium from total capital deployed. The video shows this as the key number for strike selection decisions because selling covered calls above this level eliminates the possibility of realizing losses even if assigned.
The components include:
The discrepancy between the manual calculation and the video's displayed $27.76 likely reflects that not all previous positions are visible in the current view, or some premium collection has not yet settled. The important concept remains: cost basis with premium is always significantly lower than assignment cost basis, creating a safety margin for strike selection.
With BITO trading at $25.22 at the time of recording, the position shows:
This analysis reveals that premium collection has already recovered 43% of the paper loss ($970 ÷ $2,240 = 43.3%). If BITO simply recovers to $27.76, the entire position becomes profitable despite the stock never reaching the $29.70 average assignment price. This demonstrates the strategic advantage of tracking cost basis with premium rather than focusing solely on the stock purchase prices.
Each week you sell covered calls on the 500 shares, additional premium further reduces your cost basis with premium. For example:
Current situation:
If you sell 5 covered calls weekly at $0.30 premium for 4 weeks:
After four more weeks of covered call premium, the stock only needs to reach $26.56 for breakeven instead of the current $27.76, making recovery $1.20 easier even if the stock price remains unchanged or declines slightly.
This compounding effect means that holding the shares and consistently selling covered calls continuously improves the position even in a stagnant or slowly declining market, as long as the stock does not fall faster than premium collection can offset the decline.
One of the most valuable insights from this video addresses when to roll cash-secured puts to avoid assignment versus strategically accepting assignment to build share positions. The choice between these approaches fundamentally affects capital efficiency, position size, and income generation potential.
The video explicitly states that in a real money account with limited capital, the approach demonstrated (accepting assignments repeatedly) would not be optimal. Instead, cash-secured puts would be actively managed through rolling to preserve capital while continuing to collect premium.
Rolling Mechanics:
When a cash-secured put approaches expiration with the stock price below the strike, extrinsic value (time value) decreases. When extrinsic value drops below $0.10 per share ($10 per contract), the optimal move is typically rolling the position forward to a future expiration, potentially at a different strike, to collect additional premium.
The rolling transaction involves:
Original position:
Rolling decision:
Wait, that shows a debit on the roll? This illustrates a critical point about rolling: when a stock has moved significantly against you, rolling to a lower strike may require paying a net debit rather than collecting additional credit. In this scenario, the trader would likely accept assignment rather than pay to roll.
Better rolling scenario:
This second example shows successful rolling: collecting additional premium while adjusting the strike down slightly, all without accepting assignment or deploying the full $3,100 capital to purchase shares.
The video establishes several conditions that favor rolling over assignment:
Conversely, several conditions make accepting assignment the better strategic choice:
The video establishes a personal guideline of never rolling beyond 30 days out, except to the next monthly expiration even if slightly beyond 30 days. This rule prevents tying up capital for extended periods while maintaining the flexibility to adjust strikes and respond to market changes.
Within this 30-day window, typical rolling might occur:
This active management means checking positions at least twice per week (mid-week and near expiration) to make informed decisions about rolling timing and strike selection.
After completing all transaction recording, processing assignments, and reconciling account balances, the workflow proceeds to planning the following week's option positions. This forward-looking analysis determines which strikes offer optimal premium while managing assignment risk appropriately for current market conditions.
The position now holds 500 shares with four covered call contracts at the $30.50 strike expiring May 17th. This leaves 100 shares uncovered (the shares just assigned from the $27.50 cash-secured put), creating an opportunity to write an additional covered call.
The strategic question becomes: which strike should be used for this fifth covered call?
Option 1: Match existing contracts at $30.50 strike
Option 2: Sell at-the-money or slightly out-of-the-money (around $25.50-$26.00)
Option 3: Sell at cost basis with premium (around $28.00 strike)
The video shows examining the $30.50 strike at the May 17 expiration (matching the existing four contracts) but does not show finalizing this decision, noting that spreads are wide on the weekend and the actual decision will be made Monday when the market opens and spreads tighten to reflect real tradable prices.
Another strategic consideration is whether to roll the existing four covered calls from $30.50 down to a lower strike to collect additional premium. The analysis involves comparing:
The decision framework considers:
Profit comparison if assigned at different strikes:
| Strike Price | Profit Per Share (vs $27.76 cost basis) | Total Profit (400 shares) |
|---|---|---|
| $30.50 (current) | $2.74 | $1,096 |
| $30.00 | $2.24 | $896 |
| $29.00 | $1.24 | $496 |
Rolling from $30.50 to $30.00 would sacrifice $200 in potential profit if assigned but would collect rolling premium. If the roll collected $0.26 per share, that's $104 in immediate income (4 contracts × 100 × $0.26). The $200 profit reduction only matters if assigned, while the $104 is captured immediately regardless of assignment.
However, the video shows the stock in a clear downtrend with recent price action suggesting continued weakness. In this environment, assignment at $30.00 or even $30.50 seems unlikely, making the additional premium from rolling attractive since you are unlikely to sacrifice the assignment profit difference anyway.
For continuing to play both sides of the position, the next decision involves selecting a cash-secured put strike. With BITO at $25.22, potential strikes include:
The video shows queuing a cash-secured put at the $25.50 strike but notes this would be adjusted Monday based on where BITO is trading and what premiums are available. The key principle: select strikes where you genuinely want to own shares if assigned, then collect premium as compensation for that obligation.
The final critical step in the weekly workflow involves reconciling your tracking system's calculated account value with your broker's reported account value. This verification ensures all transactions have been recorded correctly, no transactions are missing or duplicated, and your cost basis calculations remain accurate going forward.
Without regular reconciliation, small errors compound over time until the discrepancy becomes so large that finding the source becomes extremely difficult. Weekly reconciliation catches errors immediately when you still remember the week's transactions and can quickly identify what was missed or recorded incorrectly.
Common errors that reconciliation catches include:
The video demonstrates the complete reconciliation workflow:
Step 1: Navigate to Dashboard
MyATMM's dashboard displays total account value calculated from:
The dashboard shows: $89,128
Step 2: Compare to Broker Account Statement
Switching to the Think or Swim account statement, the total account value shows: $89,128
Step 3: Verify Perfect Match
The exact match between MyATMM's calculated value ($89,128) and Think or Swim's reported value ($89,128) confirms all transactions have been recorded correctly. This match indicates:
The video actually demonstrates finding an error during reconciliation. After processing the cash-secured put assignment, the trader created the stock position showing the 100 new shares at $27.50 but forgot to click save to move this transaction from proposed status to permanent transaction history.
During the dashboard reconciliation, the trader noticed this oversight and returned to the Cost Basis screen to save the assignment transaction properly. This real-time error discovery shows exactly why reconciliation matters: catching the mistake immediately prevents it from creating confusion in future weeks when remembering which specific transaction was missed becomes much harder.
Beyond account value reconciliation, the video shows reviewing monthly premium collection statistics as a secondary verification and performance tracking metric:
Tracking monthly premium provides context for evaluating strategy performance across different market environments. The trader notes that premium collection varies significantly month to month based on volatility levels, stock price movement, and the number of positions being managed.
April's $967.74 represents strong premium collection for a single-stock strategy, averaging approximately $242 per week over the month. May's partial month shows the position remains active with continued premium collection despite BITO's declining price.
While this tutorial focuses on a single week's transaction workflow, understanding how the continuous wheel strategy performs over extended periods reveals its power for generating consistent income while building positions at favorable cost bases.
The BITO position demonstrates dollar cost averaging through repeated assignments at progressively lower strikes. The six assignments occurred at $32.00, $31.50, $29.00, $28.50, $27.00, and $27.50, creating a $29.70 average cost that sits between the highest and lowest entry points.
This averaging effect provides several strategic advantages:
After accumulating 500 shares through assignments, the position can now sell five covered call contracts weekly. If each contract collects $0.30 premium weekly, that represents:
This calculation shows the theoretical maximum if you could consistently collect $0.30 weekly on five contracts every week for a year without any assignments (unlikely but illustrates the income potential). More realistically, some weeks collect more, some less, and occasional assignments reset positions, but the annual yield potential remains substantial.
The video mentions BITO pays quarterly dividends, adding another income layer beyond option premium. While the paper trading account used in the demonstration does not receive dividend payments, a real money account would collect these dividends while holding shares, further improving the cost basis with premium calculation.
BITO's dividend yield varies based on Bitcoin futures market conditions but has historically paid quarterly distributions. For a 500-share position, even a modest $0.10 per share quarterly dividend would add $50 per quarter or $200 annually, representing another 1.3% yield on the $14,850 cost basis.
The continuous wheel can theoretically run indefinitely, but practical exit scenarios include:
The video suggests the strategy continues as long as BITO keeps offering reasonable premium on both covered calls and cash-secured puts, and as long as capital is available to handle potential additional assignments if BITO continues declining.
Managing cash-secured put assignments effectively transforms what many traders view as failures into strategic position entries that enable consistent income generation through covered calls while building positions through dollar cost averaging at progressively better prices.
The video provides clear guidance on when to use each approach:
Accept assignments when:
Roll positions when:
The video demonstrates MyATMM throughout the complete workflow, showing how proper cost basis tracking enables:
The dashboard view showing monthly premium collection, total account value, and detailed position analysis provides the complete picture option sellers need to evaluate whether the strategy continues performing adequately or requires 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 stock declines significantly below the strike. The wheel strategy requires sufficient capital to accept assignments and hold shares through potential extended declines.
Dollar cost averaging does not guarantee profits and can result in purchasing increasing quantities of declining securities. Assignment locks capital into share positions that may show unrealized losses for extended periods. BITO carries unique risks as a Bitcoin futures-based ETF including extreme volatility, Bitcoin price risk, futures market risks, tracking error, and regulatory uncertainty.
The 1.6% ROI referenced in the title represents premium collected relative to assignment cost for a single transaction and does not represent guaranteed or typical returns. Premium collection varies significantly based on market volatility, stock price movement, strike selection, and time to expiration. Past performance shown in this example does not guarantee future results.
This content is for educational purposes only and should not be considered financial advice. Always consult with a qualified financial advisor before implementing options strategies.
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