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The ten wheel mistakes almost everyone makes in year one

Most first-year wheel losses come from the same short list of mistakes, and none of them is about picking the wrong strike. They're about size, the stock, the calendar and the bookkeeping. Here are the ten, and what they cost.

Options guide · 9-minute read · Updated 2026-10-26

The ten, one paragraph each

1. Selling puts on a stock you don't want to own. The put is a promise to buy 100 shares. If you only wanted the premium, assignment feels like a punishment, and you'll make bad decisions to escape it. The wheel strategy only works on stocks you'd buy anyway.

2. Sizing by the premium instead of the strike. A $1.00 premium looks small, so people sell three contracts. The risk is three sets of 100 shares at the strike, not three premiums. Size as if you were buying the shares today.

3. Chasing the biggest premium. A fat premium means the market expects a big move. High Implied volatility is a price tag on risk, not a gift. The names with the best premiums are often the ones that can fall hardest.

4. Selling into earnings without checking. An earnings report inside your expiry can gap the stock through your strike overnight. The premium looks great for a reason. Check the date before every trade.

5. Counting the premium as profit. The cash lands on day one, so it feels earned. It isn't until the shares are gone. Three "wins" on paper can hide one losing position underneath. I counted premium as profit too early shows the trap.

6. Selling a call below your cost basis. After an assignment the stock is lower, and the only calls that pay are below what you paid. Sell one, and a recovery locks in your loss. This is the most expensive habit on the list; the strike-below-cost trap works it through.

7. Having every position open at once. Five puts on five stocks all expiring the same Friday is one trade, not five. A market drop assigns all of them in one week. Stagger expiries and keep cash back.

8. Rolling to avoid a loss instead of to manage a trade. Rolling for a credit feels free. It usually just moves the same loss to a later date and a bigger commitment. A roll needs a reason beyond "I don't want to be assigned."

9. Ignoring the spread. Thin options have wide bid-ask spreads. Selling at the bid and buying back at the ask can eat half the premium. Check Open interest and the spread before you sell.

10. Trading from stress instead of the plan. The plan was written on a calm day. The revenge roll and the doubling-down put were decided on a bad one. Mistakes option sellers make under stress covers what that looks like.

The one example that holds most of these (an illustration, not a trade idea)

Here's a first-year trade that makes mistakes 1, 2, 3, 4 and 6 in a row. Round numbers, made-up stock.

XYZ trades at $50. Earnings are in two weeks. The 30-day $45 put pays $2.50, more than double the usual, because of the report. The seller has $25,000 and sells five contracts, collecting $1,250, thinking "that's a nice premium for a stock I sort of like."

Earnings disappoint. XYZ gaps to $36 and sits there into expiry.

Wait, the second row looks better than the first. It is, on that one day. But see what was given up: the stock recovered to $43 and kept going. Had the seller held the shares with no call, at $43 the position would stand at +$250, with the put premium counted. Instead, the $40 call sold the recovery. Final result on $22,500 of stock the seller "sort of liked": a $850 loss, realized, and no shares left to recover with.

Now the same trade done by the rules:

Same stock, same bad luck, a $200 paper loss instead of an $850 realized one. Nobody wins in both tables. The difference is the size of the mistake.

Why year one is different

Nothing on the list needs a better options model. Each one is a decision made before the trade: what stock, how big, which week, which strike relative to cost, and how you'll write it down. That's good news. They're all fixable with a checklist and a journal.

The hard part is that the first few trades often go fine. Premiums land, puts expire, and the habits set before the first real drop tests them. The mistakes are invisible until the market shows them to you.

What to do about it

1. Write a one-page rule sheet before the next trade: stocks you'd own, max size per position, no earnings inside the expiry, calls only at or above cost, max number of open positions.
2. Keep one journal row per position, tracking cost basis, not premium. Mark it to market every month.
3. Stagger your expiries so no single Friday can assign everything.
4. Read a losing row every month, even a small one. Reading your journal after a losing trade gives the questions.
5. Paper-trade the first three cycles if you haven't sold a real put yet. The habits form the same; the losses don't.

A Canadian note: cash-secured puts aren't allowed in every TFSA, and options permissions differ by broker, so check both before you build a plan around the full wheel in a registered account.

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