Bitcoin continues to dominate financial headlines with its dramatic price movements and growing mainstream adoption. While many investors buy and hold Bitcoin directly or through exchange-traded funds (ETFs), option sellers have discovered a more systematic approach to profiting from Bitcoin's volatility: selling covered calls and cash-secured puts on the ProShares Bitcoin Strategy ETF (BITO).
This strategy transforms Bitcoin exposure from a speculative buy-and-hold position into an active income-generating asset. Rather than simply hoping Bitcoin's price increases, you collect weekly option premium regardless of whether the cryptocurrency moves up, down, or sideways. The continuous wheel strategy applied to BITO creates consistent cashflow while maintaining exposure to Bitcoin's potential upside through either direct share ownership or the obligation to purchase shares at predetermined prices.
BITO presents unique advantages for the continuous wheel strategy that traditional individual stocks don't offer. The ETF pays dividends in addition to the option premium you collect, provides exposure to Bitcoin futures rather than direct cryptocurrency ownership (avoiding custody and security concerns), and offers remarkably high option premium due to Bitcoin's volatility. These characteristics make BITO an excellent candidate for systematic option selling strategies designed to generate weekly income.
Before implementing any option selling strategy, you need to understand the underlying asset you're committing to own. BITO is not a direct Bitcoin holding fund—it's a futures-based ETF that provides Bitcoin exposure through monthly futures contracts on regulated exchanges.
The ProShares Bitcoin Strategy ETF tracks Bitcoin futures prices rather than spot Bitcoin itself. This structure means BITO's performance will generally correlate with Bitcoin's price movements but may experience tracking differences due to futures roll costs (contango or backwardation) and fund management expenses. For option sellers, this futures-based structure is actually advantageous because it allows exposure to Bitcoin's price action within a traditional brokerage account without the complexities of cryptocurrency wallets or exchanges.
BITO trades like any ETF on major stock exchanges with standard market hours. You can buy and sell shares through your regular brokerage account, and options on BITO are liquid with weekly expiration cycles available. This accessibility makes Bitcoin exposure practical for traders who prefer traditional securities markets over cryptocurrency exchanges.
One often-overlooked characteristic of BITO is its dividend payments. Unlike Bitcoin itself (which pays no yield), BITO distributes income to shareholders. This dividend component is particularly valuable for wheel strategy practitioners because it provides additional income beyond the option premium you collect. If you get assigned shares on a cash-secured put, those shares immediately begin generating dividend income while you sell covered calls against them.
The combination of dividend payments plus option premium creates a dual income stream that significantly enhances total returns compared to simply holding Bitcoin or trading it speculatively. This is why the demonstration specifically emphasizes focusing on dividend-paying ETFs rather than non-dividend-paying individual stocks—you want every position to generate income regardless of price movement.
Bitcoin is famous for dramatic price swings, sometimes moving 10-20% in a single week. This volatility directly translates to higher option premium because option prices reflect the expected range of future price movements. When an underlying asset is volatile, the probability of options finishing in-the-money increases, so market makers charge more premium to sell those options.
For option sellers, this volatility premium is the opportunity. While buy-and-hold Bitcoin investors experience emotional stress during 20% corrections, systematic option sellers collect elevated premium during those exact periods. The strategy accepts the volatility as a feature, not a bug, and harvests premium income from it week after week.
The demonstration shows selling a single at-the-money cash-secured put on BITO for approximately $1.80 in premium with roughly a week until expiration. On a $30-32 stock price, this represents about 5-6% return per week just from option premium. Annualized (assuming you can maintain similar rates), this approaches returns that would be exceptional for most traditional stock strategies—and that's before considering the dividend income.
The demonstration walks through MyATMM's two screening tools for identifying attractive option selling opportunities: the Covered Call Screen and the newer Option Search feature. Understanding how to efficiently screen for opportunities is critical when you're managing multiple positions or looking to deploy capital into the best available trades.
MyATMM's original Covered Call Screen displays each stock symbol on a single row showing both the call and put side for the next upcoming expiration. This consolidated view provides a quick snapshot of what premium is available for each ticker in your watchlist. You can filter this data by several criteria to narrow down to your preferred opportunities.
The demonstration's filtering approach focuses on dividend-paying stocks first, reducing the universe from 529 total tickers to just 269 dividend-payers. Then applying an ETF-only filter further narrows the list to ETFs with weekly options available. This systematic filtering ensures you're only looking at tickers that match your strategic criteria—in this case, dividend-paying ETFs that offer weekly premium collection opportunities.
Additional filters applied include minimum ROI thresholds (1% or higher) and price ranges ($20-$50 per share to manage capital requirements). The combination of these filters creates a focused list of opportunities that match specific risk and return parameters rather than overwhelming you with hundreds of possibilities.
MyATMM's newer Option Search screen provides more granular control by showing individual strike prices and expiration dates rather than just the next expiration's summary. This detail level is particularly valuable when you're comparing multiple expiration dates or considering which specific strike price offers the best risk-reward balance.
The demonstration applies similar filters in the Option Search screen: dividend-paying ETFs, specific expiration date (April 5th in the example), puts only (filtering out calls since we're looking for cash-secured put opportunities), price range between $20-$50, and minimum 1% ROI. These filters reduce 500+ initial results down to manageable numbers where you can actually evaluate each opportunity individually.
The ability to sort by ROI percentage helps identify which tickers are offering the highest returns for the capital commitment. BITO consistently appears at the top of these sorted lists because Bitcoin's volatility commands premium significantly higher than traditional stocks or most other ETFs.
An important practical detail covered in the demonstration is populating your MyATMM watchlist with all weekly ETF symbols. The CBOE (Chicago Board Options Exchange) website offers a downloadable CSV file listing all equity symbols with weekly options available. This list separates individual equities from ETFs, making it easy to copy all the ETF symbols and paste them directly into MyATMM's symbol addition field.
Adding these 95 weekly ETF symbols (73 of which are dividend-paying in the demonstration) dramatically expands your screening universe and ensures you're seeing all available weekly ETF opportunities, not just the handful you might think to add manually. This comprehensive watchlist approach is how you discover opportunities like BITO that you might otherwise overlook.
After screening identifies BITO as an attractive opportunity, the next step is analyzing the specific option contract to understand exactly what you're committing to and what return you're targeting. This analysis phase separates systematic traders from speculators—you're making informed decisions based on calculated probabilities and acceptable outcomes rather than gambling on directional moves.
The demonstration emphasizes looking at least 2-3 expirations ahead to evaluate whether there's a substantial premium jump for slightly longer-dated contracts. The logic here is simple: if you can collect double the premium by extending the expiration from one week to two weeks, you're getting the same rate per week with less frequent transaction management.
In the BITO example, the at-the-money put for the upcoming Friday expiration showed approximately $1.75 in premium. Looking at the following week, the premium was about $2.34—only 60 cents more for an additional week of time. This indicates the majority of extrinsic value (time value) concentrates in the nearest expiration, making the weekly contract the most efficient choice for maximizing premium collection relative to time commitment.
This analysis explains why weekly option selling has become the standard approach for continuous wheel strategy practitioners. You're selling the portion of the option's value that decays most rapidly (the front week's extrinsic value) rather than selling longer-dated contracts where time decay is slower and you're accepting more risk for proportionally less premium.
When placing the order through Thinkorswim, the demonstration shows a bid-ask spread of $1.75 to $1.86—an 11-cent spread. This spread represents the difference between what buyers are willing to pay (bid) and what sellers are asking (ask). Your goal is to get filled somewhere in the middle or better, improving upon the bid price to collect more premium.
The approach shown is placing the order at $1.80, splitting the difference and adding a nickel to the bid. This pricing strategy acknowledges that you probably won't get the ask price (sellers rarely do) but you also shouldn't settle for the bid immediately. Market makers are often willing to meet you somewhere in the middle, especially on liquid options like BITO where there's active trading.
Getting filled at $1.80 instead of $1.75 (the bid) represents 5 additional dollars per contract, or approximately 3% more premium. Across multiple contracts and many weeks of trading, this discipline of working limit orders rather than accepting market prices significantly improves total returns.
Selling one at-the-money put on BITO at a $32 strike price (approximate from the demonstration) requires approximately $3,200 in cash securing the contract. Collecting $1.80 in premium ($180 minus commission) represents about a 5.6% return on this committed capital for roughly one week of exposure.
This return calculation is critical for comparing BITO to other opportunities. While a dividend aristocrat stock might offer 1-2% weekly premium, BITO is offering 5-6%. The tradeoff is Bitcoin's volatility—you're accepting higher probability of assignment and larger potential price swings. But for traders specifically seeking income generation and willing to manage assignments, this elevated return is exactly the opportunity you're targeting.
An interesting observation from the demonstration is that BITO's put-side premium significantly exceeds call-side premium. While the cash-secured put might offer 5-6% premium, the covered call on the same strike and expiration might only offer 2-3%. This asymmetry is unusual—most stocks show relatively balanced premiums on both sides.
This put-side premium skew suggests the market perceives higher downside risk than upside potential for Bitcoin in the near term, or alternatively, that there's stronger demand from hedgers buying put protection. Regardless of the cause, this asymmetry creates particularly attractive cash-secured put opportunities. Even if you get assigned shares, you can then sell covered calls collecting 2-3% weekly while holding a dividend-paying position—still exceptional compared to traditional strategies.
Once analysis confirms BITO offers attractive premium and acceptable risk, execution becomes straightforward. The demonstration walks through placing the order in Thinkorswim, but the principles apply to any brokerage platform supporting options trading.
The trade structure is a short put—you're selling to open one put contract. The key parameters include:
The order is placed as a credit transaction—you're receiving money ($180 before commission) for accepting the obligation to purchase 100 shares of BITO at $32 if the option finishes in-the-money at expiration. This $3,200 capital commitment must be available in your account as cash securing the put contract.
An important detail shown in the demonstration is verifying you're placing the trade in the correct account. If you manage multiple accounts (such as both a taxable brokerage account and an IRA), you need to confirm the order is routing to your intended account before sending it.
Income strategies using the continuous wheel approach are often well-suited to IRA accounts because the frequent option premium collection creates many taxable events in taxable accounts. In an IRA, all that premium income grows tax-deferred (traditional IRA) or tax-free (Roth IRA) until withdrawal. This tax efficiency significantly enhances long-term compounding compared to paying short-term capital gains taxes on every weekly premium collection.
After confirming all parameters, the order is submitted. Because this is a limit order at $1.80 (between the bid of $1.75 and ask of $1.86), the order goes into the queue waiting for a counterparty willing to buy the put at that price. Depending on market conditions and time of day, fills might happen immediately or require minutes to hours.
The demonstration places the order with the understanding that market open the following day will likely provide better fill opportunities when volume and liquidity increase. This patience is another hallmark of systematic trading—you're not chasing trades at unfavorable prices but rather setting reasonable targets and waiting for the market to meet you there.
Once the order fills, you've collected approximately $180 in premium (minus commission) and accepted the obligation to purchase 100 shares of BITO at $32 if the option is in-the-money at Friday's expiration. From this point, several outcomes are possible:
This is the continuous wheel strategy in action—you're systematically selling puts to generate income, accepting assignments when they occur, then selling covered calls against those shares to continue generating income. The strategy is "continuous" because you're always collecting premium at some stage of the cycle.
The demonstration specifically notes that Bitcoin is "really hot in the news these days" and this creates an opportunity to "play off the Bitcoin hype but cash flow it at the same time." This framing is important—you're not speculating on whether Bitcoin will reach $100,000 or crash to $10,000. You're systematically collecting premium from Bitcoin's volatility while maintaining exposure through either share ownership or the obligation to purchase shares. Whether Bitcoin trends up, down, or sideways, you're generating weekly income from the price action.
The continuous wheel strategy's power lies in how it handles assignments. Rather than viewing assignment as failure, the strategy treats it as an expected outcome that simply transitions you to the next phase of income generation.
If BITO closes below $32 at Friday's expiration, you'll be assigned 100 shares over the weekend. Your brokerage account will show 100 shares of BITO with a purchase price of $32 per share. However, your true cost basis is actually $30.20 ($32 strike minus $1.80 premium collected), and this is where tools like MyATMM become critical for accurate tracking.
Traditional brokerage statements typically show your cost basis as the strike price ($32) without accounting for the premium you collected when selling the put. This creates a cost basis tracking gap that makes it difficult to know your true break-even point when selling covered calls or evaluating position performance. MyATMM solves this by tracking the option premium and automatically adjusting your cost basis to reflect your actual capital at risk.
Once you own the BITO shares, the next step is selling covered calls to generate additional premium. You might select a strike price above your cost basis (to potentially profit from both premium and capital appreciation) or at-the-money (to maximize premium collection while accepting that assignment would close the position at a small gain or break-even).
The demonstration notes that even BITO's covered call premium is substantial—about 2% per week even on the call side. If you can consistently collect 2% weekly premium on shares that also pay dividends, your total return from the position becomes exceptional even if the stock price goes nowhere.
The "continuous" aspect of the continuous wheel strategy means you're always in some phase of premium collection:
This systematic cycle continues week after week, month after month. Each Friday expiration either releases your capital to repeat the process or transitions you to the next stage of the wheel. You're never sitting idle waiting for a specific price target or hoping for a particular direction—you're actively collecting premium from the current market conditions regardless of trend.
During any period when you own BITO shares (between put assignment and call assignment), you'll also collect dividend payments. This dividend income adds to the option premium you're collecting from covered calls, creating a dual income stream that significantly enhances total returns.
This is precisely why the demonstration emphasizes focusing only on dividend-paying stocks and ETFs for the continuous wheel strategy. If you're going to potentially own shares for weeks or months while selling calls against them, you want those shares generating dividend income. Non-dividend-paying stocks might offer adequate option premium, but you're missing the second income stream that dividend-payers provide.
While BITO's elevated premium creates attractive income opportunities, that premium exists precisely because Bitcoin is a volatile, higher-risk asset. Proper risk management is essential for sustaining this strategy over time rather than suffering significant losses during Bitcoin's inevitable corrections.
Bitcoin regularly experiences 20-30% price corrections within weeks. If you're assigned BITO shares at $32 and Bitcoin corrects 25%, your shares might be worth $24 while you're trying to sell covered calls. Your premium income continues, but you're sitting on a significant unrealized loss until Bitcoin recovers.
Managing this volatility risk requires accepting that unrealized losses are part of the strategy. You're committed to the long-term wheel approach where premium collection eventually overcomes temporary price declines. Position sizing becomes critical—you should only commit capital to BITO that you're comfortable having tied up potentially for months if a significant correction occurs.
The demonstration shows a single contract (100 shares at roughly $32, or $3,200 commitment). For a properly sized portfolio, this BITO position should represent only a portion of total capital—perhaps 10-25% depending on risk tolerance and overall account size.
Avoid the temptation to commit 100% of your capital to BITO just because the premium is exceptionally high. If Bitcoin experiences a severe correction while you're fully deployed, you have no capital available to average down, no dry powder for other opportunities, and maximum stress exposure to a single volatile asset. Maintaining diversification across multiple wheel strategy positions (including both BITO and more stable dividend aristocrats) provides better risk-adjusted returns over time.
When BITO moves against your position, you always have the option to roll rather than accept assignment. Rolling means closing your current option position and simultaneously opening a new position at a different strike price or expiration date to collect additional premium and potentially avoid assignment.
The decision to roll or accept assignment depends on your view of Bitcoin's outlook and your desire to own shares. If you believe Bitcoin is in a sustained downtrend and prefer to wait for stabilization before ownership, rolling down and out (to a lower strike price and later expiration) collects more premium while deferring assignment. If you're comfortable owning BITO at the current levels, accepting assignment transitions you to the covered call phase of the wheel.
Cash-secured put selling requires maintaining sufficient cash to purchase shares if assigned. For BITO at $32 per share, one contract requires $3,200 in available cash. This capital sits idle earning minimal interest while securing the put, representing an opportunity cost compared to other potential investments.
Some traders use margin to reduce cash requirements, but this introduces margin interest costs and risk of margin calls during volatility. The demonstration uses a cash-secured approach in an IRA (which doesn't allow margin), ensuring the strategy remains conservative and sustainable without leverage risk.
While the continuous wheel strategy can be applied to virtually any optionable stock or ETF, BITO presents several specific characteristics that make it particularly well-suited to this approach.
BITO offers weekly option expirations, which is essential for maximizing the time decay advantage that option sellers exploit. Weekly options allow you to repeatedly sell the front-week extrinsic value rather than committing to longer timeframes with slower decay rates. The demonstration's emphasis on weekly options reflects this focus on efficient premium collection.
Implied volatility measures the market's expectation of future price movement. Bitcoin's historical volatility (actual past price swings) and implied volatility (expected future swings) both run significantly higher than traditional stocks. This elevated implied volatility directly translates to higher option premium—the market charges more for Bitcoin options because there's a higher probability of large price movements.
For option sellers, high implied volatility is the opportunity. You're collecting premium that reflects worst-case volatility scenarios. When actual volatility comes in below implied levels (which often happens), you profit from the volatility risk premium that was priced into the options you sold.
Unlike direct Bitcoin ownership which generates no yield, BITO pays regular dividends to shareholders. This dividend component transforms BITO from a pure speculation vehicle into an income-generating asset even when option premium is temporarily unavailable or unattractive. The combination of option premium plus dividends creates total income yields that can exceed 50-100% annually during favorable conditions.
Because BITO is an ETF trading on regulated exchanges with standard options markets, it fits seamlessly into traditional brokerage accounts with standard options approval. You don't need cryptocurrency exchange accounts, cold storage wallets, or specialized crypto custody arrangements. This accessibility makes Bitcoin exposure practical for traders who prefer traditional securities markets.
BITO maintains sufficient trading volume and options open interest to ensure reasonable bid-ask spreads and reliable fills. The 11-cent spread shown in the demonstration on a $1.80 option is about 6%—acceptable for an ETF that only launched recently. More established positions would have even tighter spreads. This liquidity ensures you can enter and exit positions without significant slippage eating into your premium collection.
| Feature | BITO ETF | Direct Bitcoin |
|---|---|---|
| Trading Platform | Standard brokerage | Crypto exchanges |
| Weekly Options | Available | Limited or unavailable |
| Dividend Income | Yes | No |
| IRA Eligibility | Yes | Complex/Limited |
| Custody Requirements | Standard brokerage | Wallet management |
| Premium Collection | Systematic via options | Difficult/expensive |
Successfully executing the continuous wheel strategy on BITO is only half the challenge—you also need accurate tracking to measure performance, optimize strike selection, and manage cost basis across assignments and premium collection.
The cost basis challenge for wheel strategy practitioners is that every premium collection adjusts your effective cost basis, but brokerages don't track this in their standard cost basis reporting. If you sell a put for $1.80 and get assigned at $32, your brokerage shows $32 cost basis. MyATMM shows your true cost basis of $30.20, which is essential for making informed decisions about covered call strike selection.
When considering which covered call strike to sell, you need to know whether that strike is above or below your true cost basis. If you're selling calls below your cost basis, you're accepting that assignment would result in a loss before accounting for the call premium. MyATMM's accurate cost basis tracking provides this critical information at a glance.
Over weeks and months of continuous wheel trading, total premium collected becomes substantial. MyATMM maintains a running total of all premium income from both puts and calls, providing clear visibility into how much income this strategy is generating versus your committed capital. This performance tracking helps you evaluate whether BITO's elevated premium is actually translating to superior returns after accounting for assignments, price movements, and dividends.
The platform maintains complete position history showing every transaction that affected your BITO cost basis: initial put sales, assignments, covered call sales, call assignments, dividend payments, and any adjustments. This transaction log provides both an audit trail for tax reporting and a performance record for strategy refinement.
BITO shouldn't exist in isolation—it should be one position within a diversified portfolio of wheel strategy positions. MyATMM's dashboard view shows BITO's performance alongside your other holdings, providing the portfolio-wide context needed to evaluate whether BITO's risk-return profile is optimal for your overall strategy or if adjustments are warranted.
The continuous wheel strategy applied to BITO transforms Bitcoin from a speculative buy-and-hold asset into a systematic income-generating position. Rather than hoping Bitcoin appreciates, you collect weekly premium from Bitcoin's volatility through covered calls and cash-secured puts, supplemented by BITO's dividend payments when you own shares.
BITO's exceptional option premium—often 3-5% per week or more—reflects Bitcoin's volatility and creates income opportunities that dwarf traditional dividend stocks. The tradeoff is accepting Bitcoin's price volatility and the likelihood of temporary unrealized losses during corrections. Proper position sizing and diversification across multiple wheel strategy positions manages this risk while maintaining exposure to Bitcoin's premium income potential.
The screening process demonstrated through MyATMM's Covered Call Screen and Option Search tools shows how to systematically identify the best weekly option opportunities among dividend-paying ETFs. Filtering by dividend status, ETF classification, weekly expirations, price ranges, and minimum ROI creates a focused list where BITO often ranks at the top due to its elevated premium characteristics.
Execution discipline matters: analyzing multiple expirations to confirm the front week offers the best premium concentration, working limit orders to improve fill prices beyond the bid, and confirming correct account selection (particularly for IRA accounts where tax efficiency enhances long-term returns). These execution details compound over dozens of trades to significantly impact total returns.
The continuous aspect of this strategy means you're always collecting premium at some phase: selling puts when you have cash available, selling calls when you own shares, and cycling between the two as assignments occur. This systematic approach removes the stress of timing Bitcoin's volatile price movements and replaces it with consistent premium collection regardless of trend direction.
MyATMM provides the cost basis tracking essential for managing this strategy accurately. Traditional brokerage statements don't factor option premium into cost basis, making it difficult to know your true break-even points and whether covered call strikes are above or below your effective purchase price. MyATMM solves this tracking gap, ensuring you can make informed decisions based on accurate data rather than rough estimates.
If you're interested in generating income from Bitcoin's volatility without speculating on price direction, the continuous wheel strategy on BITO offers a systematic approach. You can start practicing with a free MyATMM account tracking up to 3 tickers, which is sufficient to track BITO alongside one or two more conservative positions. For unlimited ticker tracking with full cost basis management capabilities, membership is available starting at $4.95 monthly.
Options trading involves significant risk and is not suitable for all investors. Bitcoin and Bitcoin-related ETFs like BITO are particularly volatile assets that can experience rapid and substantial price movements. Selling options on volatile underlying assets increases the probability of assignment and potential losses.
This content is for educational purposes only and should not be considered financial advice. Past performance does not guarantee future results. The premium levels and returns shown in examples may not be achievable in current or future market conditions. Always understand the risks involved and consider consulting with a qualified financial advisor before implementing options strategies, particularly with volatile assets like Bitcoin ETFs.
MyATMM provides accurate cost basis tracking for option sellers, factoring in premium from covered calls and cash-secured puts to show your true break-even points.
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