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Start the wheel with a put or a call? It depends on what you hold

If you hold cash, start the wheel with a cash-secured put. If you already own 100 shares, start with a covered call. The risk picture is nearly the same either way; what differs is what you hold today.

Options guide · 8-minute read · Updated 2026-10-26

The short answer

The wheel strategy has two halves. A cash-secured put turns cash into shares at a price you chose. A covered call turns shares back into cash at a price you chose. You start on whichever half matches what's in your account.

• Cash, no shares: sell a put. You get paid to wait for your price.
• 100 shares already: sell a call. You get paid to wait for your sell price.
• Both: either. Most people start with the put, because it lets them pick the entry.

Why the risk picture is almost the same

A cash-secured put at a $45 strike and 100 shares bought at $45 with a $45 covered call sold on them lose money in the same place: when the stock falls.

Same numbers, row by row. That's not a coincidence; it's the same position written two ways. The capped gain and the open-ended loss belong to both.

A worked example (an illustration, not a trade idea)

You have $10,000 in cash. A made-up stock, XYZ, trades at $50. You'd own it at $47.

Start with a put. You sell one 30-day $47 put for $1.20 ($120). Your broker sets aside $4,700.

XYZ falls to $44 by expiry. You're assigned: 100 shares at $47, cost after premium $45.80. The shares are worth $4,400. You're down $180 on the day you start the second half.

Second half. You sell a 30-day $47 call for $0.60 ($60). Then XYZ drops again, to $40.

Had you started with the call instead, by buying 100 shares at $50 and selling a $52 call, the drop to $40 would have cost about $1,000 minus the premium. Starting with the put gave you a lower entry. It didn't remove the risk.

When the put is the better first move

• You don't own the stock yet and want to name your price.
• You'd be fine never getting the shares and just keeping the premium.
• You have the full cash and your broker allows cash-secured puts at your approval level.

The put also forces the right question up front: "Would I buy 100 shares here?" If the answer is no, you've learned something before risking anything.

When the call is the better first move

• You already own 100 or more shares you'd sell at a higher price.
• Your broker only allows covered calls at your level. Many brokers approve covered calls before puts.
• Your account is a TFSA or RRSP in Canada: covered calls are widely allowed; cash-secured puts depend on the broker. Permissions differ by broker, so check.

Starting with the call also means you chose the stock as an owner, not as a premium chaser. That's a better habit.

What a cash-only beginner should do

1. Pick one stock you'd own with cash for a year.
2. Decide the price you'd pay. That's your put strike.
3. Check the earnings date is outside the expiry.
4. Sell one put. One. See cash-secured puts with a small account for sizing.
5. If it expires with no shares, read what if the put isn't assigned. If assigned, sell a call above your cost, and the loop has begun.

The mistakes that end wheels early are the same ones that end put sellers early; see cash-secured put mistakes before the first order.

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