01 Not Financial Advice
Tradevada is a trading journal and analytics platform. It is not a brokerage, an investment adviser, a financial planner, or a tax professional. Nothing on this website, in our software, in our emails, or in our newsletters constitutes investment advice, financial advice, tax advice, legal advice, or a solicitation to buy or sell any security.
All trading decisions you make are your own. The educational content, illustrations, payoff diagrams, example calculations, and analytics on this site are for informational purposes only and are not recommendations to enter any specific trade.
02 About the Wheel Strategy
The "wheel" is an options strategy involving the sale of cash-secured puts and covered calls on the same underlying security. The strategy aims to generate income from option premium across multiple cycles.
Like all options strategies, the wheel involves substantial risk and is not suitable for every investor. You should not trade the wheel — or any options strategy — unless you fully understand the risks involved and can afford to lose your entire investment.
03 Cash-Secured Put Risks
By selling a cash-secured put, you accept the obligation to purchase 100 shares per contract at the strike price if assigned. You can lose substantial money if the underlying stock declines significantly below your strike price.
04 Covered Call Risks
By selling a covered call, you cap your potential upside at the strike price. If the stock rallies sharply, your shares will be called away and you will not participate in further gains.
This is an opportunity cost rather than a cash loss — but it can be substantial. A stock that doubles after you sold a covered call at $5 above your basis means you forfeited most of that gain.
Covered calls also do not protect you from the downside in your stock position. If the underlying declines, you still bear the full loss on the shares; the premium received provides only a small offset.
05 Other Material Risks
The wheel strategy also exposes you to:
- Concentration risk — running multiple cycles on a single ticker or sector can produce significant losses if that position moves against you.
- Assignment risk — early exercise can occur at any time before expiration, particularly around ex-dividend dates.
- Gap risk — overnight news, earnings reports, regulatory events, or other catalysts can move stocks sharply outside of normal trading hours, well past your strike price, with no opportunity to exit beforehand.
- Liquidity risk — options on smaller or less-liquid underlyings may be difficult to close at fair prices, especially in fast-moving markets.
- Volatility risk — changes in implied volatility affect option prices independently of stock movement, which can produce mark-to-market losses on open positions.
- Margin and leverage risk — if you trade options on margin or in a margin account, additional losses can exceed the cash in your account.
06 No Guaranteed Returns
Past performance — yours, ours, or any example shown on this site — does not guarantee future results. Hypothetical or back-tested results are not real trading results and may not reflect actual costs, slippage, commissions, taxes, liquidity constraints, or your individual risk tolerance.
Example calculations, payoff diagrams, position scenarios, and educational content on this site are for illustrative and educational purposes only. They are not recommendations to enter any specific trade.
07 What Tradevada Is — and Isn't
Tradevada helps you track, analyze, and review trades that you decide to make on your own, through your own brokerage account. We do not:
- Execute trades on your behalf
- Recommend specific stocks, strikes, or strategies
- Provide personalized financial advice
- Hold custody of your funds or securities
- Act as a registered broker-dealer or investment adviser
All trading decisions are entirely your own. Tradevada provides software tools for record-keeping and analytics. The conclusions you draw from those tools, and the actions you take based on them, are your responsibility.
08 Read the OCC Risk Document
Before trading options of any kind, you must read and understand "Characteristics and Risks of Standardized Options" — the official options risk disclosure document published by the Options Clearing Corporation (OCC).
A copy is available at: theocc.com/company-information/documents-and-archives/options-disclosure-document
09 Consult a Professional
Tax treatment of options trades is complex and varies based on your jurisdiction, account type, and individual circumstances. The wheel strategy in particular can produce wash sale events, short-term capital gains, and assignment-related tax consequences that are often unintuitive.
Consult a qualified tax professional, financial adviser, or attorney before making any trading decision. Tradevada does not provide tax, legal, or personalized investment advice.
10 Your Acknowledgment
By using Tradevada, you acknowledge that:
- You understand the wheel strategy and options trading involve substantial risk;
- You can afford to lose the entire amount of capital you allocate to options;
- You have read or will read the OCC's "Characteristics and Risks of Standardized Options";
- You are solely responsible for your trading decisions and their outcomes;
- Tradevada is not liable for any trading losses, missed gains, tax consequences, or other financial outcomes resulting from your use of the platform.
Questions about this disclaimer? Contact support@tradevada.com.