When running the continuous wheel strategy on BITO Bitcoin ETF, assignments create opportunities to scale covered call positions while building inventory at progressively lower prices. This tutorial demonstrates managing a four-contract BITO position following yet another cash-secured put assignment, showing the complete decision process for rolling existing covered calls, adding new contracts, and managing multiple positions simultaneously while maintaining accurate cost basis tracking.
The walkthrough addresses the critical question every option seller faces when approaching expiration: should you roll your covered calls to collect additional premium or leave them to expire and potentially face assignment? The decision requires analyzing extrinsic value remaining, comparing premium available at different strikes and expirations, and understanding how your cost basis determines which strikes eliminate assignment risk while still generating acceptable income.
This video captures a real weekly workflow on a paper trading account, documenting the process from reviewing last week's transactions through recording new positions, processing a cash-secured put assignment, analyzing the updated cost basis, and planning the next week's covered calls and cash-secured puts. The position has grown from initial single contracts to four covered calls and is now adding a fifth contract, demonstrating how assignments build covered call inventory that scales weekly premium collection.
The tutorial begins by examining the account statement in Think or Swim to identify which transactions executed during the previous week. This systematic review ensures no transactions are missed and provides the data needed for accurate record keeping in the cost basis tracking system.
The account statement shows a cash-secured put assignment occurred over the weekend. The position details reveal:
The assignment occurred because BITO closed below $28.50 at Friday's expiration. When a cash-secured put expires in-the-money (stock price below strike), automatic assignment delivers shares to the put seller at the strike price regardless of the current market price. This converts the cash-secured put position into 100 shares of BITO stock, immediately creating inventory for a new covered call contract.
The video notes a critical workflow error: the recording was paused at this point, and the trader had already completed much of the transaction entry and assignment processing before resuming the recording. This real-world oversight demonstrates the importance of documenting every step as it happens rather than attempting to recreate the workflow after the fact.
Although the actual data entry was not captured on video, the completed transaction history shows the components that must be recorded for the cash-secured put that was assigned:
The video jumps to showing the completed MyATMM cost basis screen with all transactions already recorded, displaying the updated position summary showing now 400 total shares held after this fourth assignment.
Beyond the assignment, the account statement shows covered call activity from the previous week including:
Two Covered Call Contracts Rolled:
The position included two covered call contracts approaching expiration with minimal extrinsic value remaining. The trader executed rolling orders that bought back the existing contracts and simultaneously sold new contracts at a future expiration. The roll collected $0.77 in net premium after accounting for the cost to close the existing positions.
One New Covered Call Contract Added:
On the shares from a previous week's assignment, a new covered call was sold collecting $0.62 in premium. This brought the total covered call position to three contracts before the current week's assignment added the fourth contract worth of shares.
The transaction history shows these entries with dates, premium amounts, commissions, and net credits, all contributing to the total premium collected that reduces the cost basis with premium calculation.
After recording all transactions and processing the assignment, MyATMM displays the updated position metrics revealing the current state of the BITO wheel strategy position.
The position now consists of:
| Position Component | Quantity | Details |
|---|---|---|
| Total Shares Owned | 400 | Accumulated through four cash-secured put assignments |
| Covered Call Contracts | 3 active | Expiring May 10 at $30.50 strike (covers 300 shares) |
| Uncovered Shares | 100 | From most recent assignment, available for new covered call |
| Average Assignment Cost | $30.25 | Simple average of all assignment prices |
| Cost Basis With Premium | $28.44 | Assignment cost reduced by all premium collected |
The $30.25 average assignment cost represents the weighted average price paid to acquire shares through the four assignments. Each assignment occurred at the strike price of the cash-secured put that was assigned, with assignments occurring at various strikes as BITO declined over the strategy timeline.
The $28.44 cost basis with premium is the critical metric for strike selection decisions. This calculation takes the total capital deployed in assignments ($30.25 × 400 shares = $12,100) and subtracts all premium collected from covered calls and cash-secured puts, then divides by share count to get the effective per-share cost including income collected.
With BITO trading at $27.70 at the time of recording, the position shows:
This analysis reveals that premium collection has already recovered 71% of the paper loss calculated on assignment costs alone. The position only needs BITO to recover to $28.44 (instead of $30.25) to reach breakeven, making recovery significantly more achievable despite the stock trading below the average acquisition price.
The dashboard displays monthly statistics showing $737.73 in total premium collected during April 2024 across all BITO transactions. This includes:
The monthly total provides context for evaluating strategy performance. Collecting $737.73 in premium on a position that required approximately $12,100 in capital deployment represents a 6.1% monthly return on capital, or approximately 73% annualized if this rate continued consistently (though option premium varies significantly month to month based on volatility and market conditions).
With three covered call contracts expiring in 12 days at the $30.50 strike and BITO trading at $27.70, the position sits $2.80 out of the money with minimal assignment risk. However, these contracts show only $0.05 in extrinsic value remaining, making them prime candidates for rolling to collect additional premium while potentially adjusting the strike downward.
Options consist of two value components: intrinsic value and extrinsic value. For out-of-the-money options like these $30.50 calls with BITO at $27.70, all value is extrinsic (time value and implied volatility). The video shows these contracts trading at $0.05, meaning you could buy them back for just $5 per contract ($0.05 × 100 shares).
The rolling decision framework uses extrinsic value as the trigger:
At $0.05 per share ($15 total to close three contracts), these covered calls present an excellent rolling opportunity to collect fresh premium without sacrificing significant remaining value.
The video demonstrates analyzing different strike prices for the rolled position by examining the option chain in Think or Swim. The analysis considers rolling from the current $30.50 strike down to $30.50 at a future expiration, comparing expirations to find optimal premium.
Current Week (May 3 expiration - 5 days away):
Following Week (May 10 expiration - 12 days away):
Two Weeks Out (May 17 expiration - 19 days away):
The analysis reveals that premium scales proportionally with time. Since the two-week $0.26 premium is exactly double the one-week $0.13 premium, there's no advantage to locking the position for an additional week. The video concludes that rolling to May 10 (one week out) provides optimal flexibility while collecting reasonable premium.
To execute the roll in Think or Swim, the process involves:
The rolling order is structured as a two-legged trade that executes simultaneously: buy to close the May 3 $31 calls, sell to open the May 10 $30.50 calls. The platform displays the net credit of $0.13 per share, which represents the difference between the premium collected on the new sale and the cost to buy back the existing position.
An important note about rolling order pricing: the video mentions that when placing rolling orders, the trader typically accepts the platform's calculated net credit without attempting to improve it. While single-option sales can often be filled at the mark (midpoint) or slightly better by adjusting the limit price, rolling orders involve two simultaneous transactions where trying to improve the net credit often results in no fill. Accepting the displayed net credit typically results in fills within minutes during market hours.
After rolling the three existing covered call contracts to May 10 at the $30.50 strike, the position now holds 100 uncovered shares from the most recent assignment. This creates an opportunity to write another covered call contract, bringing the total to four contracts and increasing weekly premium collection proportionally.
The strategic decision involves selecting the appropriate strike for this fourth covered call. The cost basis analysis provides the framework:
Cost Basis Constraints:
Selling a covered call at any strike above $28.44 eliminates the risk of realizing a loss if assigned. Since the existing three contracts are at $30.50 (well above the $28.44 cost basis with premium), matching this strike on the fourth contract maintains position consistency and ensures all covered calls would deliver profit if assigned.
Premium Analysis for $30.50 Strike, May 10 Expiration:
Examining the Think or Swim option chain shows:
The video demonstrates setting the limit price at $0.18 (the mark) rather than accepting the $0.16 bid. This technique works reliably for single covered call sales: the order typically fills at the mark within minutes during regular trading hours as market makers adjust their spreads. Accepting the bid price immediately costs $0.02 per share ($2 per contract), which adds up significantly across dozens of weekly trades throughout the year.
To sell the fourth covered call in Think or Swim:
The order now appears in the working orders queue alongside the rolling order for the three existing contracts. Both orders will execute when the market opens Monday morning, provided BITO opens near Friday's closing price and option premiums remain similar to Friday's levels.
The video emphasizes an important workflow consideration: these orders are being queued on Sunday during the recording, meaning they will not execute until Monday's market open at 9:30 AM Eastern. This weekend planning approach allows thinking through strategy without time pressure, but requires understanding that:
The video acknowledges this limitation, noting that the actual order placement and adjustment will occur Monday morning when live pricing allows setting realistic limit prices that will actually fill. Weekend planning establishes the strategic framework (which strikes, which expirations, how many contracts), while Monday morning execution handles the tactical pricing decisions.
The continuous wheel strategy involves playing both sides of the position simultaneously: selling covered calls on shares you own while also selling cash-secured puts to generate income from cash reserves and create potential for additional assignments that build inventory further. This dual-income approach maximizes premium collection whether the stock moves up, down, or sideways.
With BITO trading at $27.70, selecting the appropriate cash-secured put strike requires balancing premium collection against assignment probability and strike desirability. The video examines the $27.50 strike as a potential target.
$27.50 Strike Analysis (May 3 expiration - 5 days away):
The strategic assessment considers:
Assignment Probability:
With the strike only $0.20 below the current price, assignment probability is moderate to high. If BITO declines $0.21 or more by Friday's expiration, assignment will occur, adding another 100 shares at $27.50. This would be the fifth assignment, bringing the total position to 500 shares.
Strike Desirability:
The $27.50 assignment price is attractive for several reasons:
The video demonstrates a tactical adjustment to the cash-secured put premium target. Rather than placing the order at $1.24 (the mark), the trader adjusts down to $1.22, giving up $0.02 per share ($2 total) to potentially improve fill probability.
The reasoning behind this adjustment reflects experience from previous weeks where orders placed at the mark sometimes did not fill when BITO's price jumped around significantly at market open Monday morning. The price volatility changed option premiums enough that the mark from Friday afternoon no longer represented a fillable price Monday morning, requiring manual intervention to adjust orders and resubmit.
By preemptively pricing slightly below the mark at $1.22 instead of $1.24, the order has a better chance of filling even if BITO opens Monday slightly higher than Friday's close. The $2 premium sacrifice is viewed as worthwhile if it eliminates the need to monitor and manually adjust the order Monday morning.
However, the video also questions whether this adjustment actually helps, noting that if BITO jumps $1.00 higher at Monday's open, a $0.02 premium discount will not matter—the option premium will change dramatically and the order still won't fill. The trader is experimenting with this approach but remains uncertain whether it provides meaningful benefit.
To sell the cash-secured put in Think or Swim:
The cash-secured put order now joins the covered call orders in the working orders queue, showing four total orders planned for Monday's market open:
If all orders fill, the position will collect approximately $162 in total premium: $39 from the covered call roll + $18 from the new covered call + $122 from the cash-secured put minus approximately $17 in total commissions and fees.
The final critical step in the weekly workflow involves reconciling the tracking system's calculated account value against the broker's reported account value. This verification ensures all transactions have been recorded correctly and no errors have accumulated in the cost basis calculations.
The video demonstrates navigating to MyATMM's dashboard, which displays total account value calculated from all positions, cash balances, and collateral requirements. The dashboard shows: $89,662.
Switching to the Think or Swim account statement, the broker's reported total account value shows: $89,662.
The exact match confirms:
Beyond account value reconciliation, the video shows checking monthly premium statistics. MyATMM's dashboard displays April 2024 premium collection: $737.73 total for the month.
This monthly tracking provides context for evaluating strategy performance. Premium collection varies significantly based on:
Tracking monthly totals allows comparing performance across different market environments to understand which conditions favor the strategy and which require defensive positioning or reduced position size.
One of the most valuable aspects of this tutorial is the explicit discussion of when to roll cash-secured puts versus accepting assignment. The video acknowledges that the approach demonstrated—accepting repeated assignments to build a large share position—represents a specific strategy suitable for paper trading accounts or traders with substantial capital.
For traders with limited capital who want exposure to multiple stocks, the video explains that rolling cash-secured puts would be the preferred approach instead of accepting assignments repeatedly. Rolling allows maintaining option positions across several tickers without accumulating large share positions that consume all available capital.
The rolling mechanics involve:
The video establishes several conditions that favor rolling over assignment:
Conversely, accepting assignment makes sense when:
The video establishes a personal rule of never rolling cash-secured puts beyond 30 days out. This guideline maintains capital flexibility and prevents tying up collateral for extended periods. The exception is rolling to the next monthly expiration even if slightly beyond 30 days, but never rolling to quarterly or longer expirations.
This 30-day limit ensures:
Managing multiple covered call contracts following assignments requires systematic workflow, accurate record keeping, and strategic decision making about rolling versus assignment. The process scales as position size grows, with each additional contract adding proportional premium collection without increasing per-contract complexity.
Roll when:
Accept assignment when:
This tutorial demonstrates managing four covered call contracts simultaneously, showing how the workflow scales as assignments build inventory:
The continuous wheel strategy creates a compounding effect where assignments build covered call inventory that generates increasing weekly premium, which further reduces cost basis with premium, making future assignments even less risky as the effective breakeven price declines continuously.
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. The continuous wheel strategy requires sufficient capital to handle multiple assignments, and accumulated positions can show unrealized losses for extended periods during market declines.
Rolling covered calls delays assignment but does not eliminate assignment risk. If the stock price rises above the strike, assignment will occur regardless of how many times the position was rolled previously. BITO carries unique risks as a Bitcoin futures-based ETF including extreme volatility, Bitcoin price risk, futures market risks, tracking error, and regulatory uncertainty surrounding cryptocurrency markets.
The 1.8% ROI referenced 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 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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