# Options Income Quick Reference - The Options Bench
Source: https://theoptionsbench.com/quick-reference/

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Covered calls, cash-secured puts and the wheel - the formulas, the strike-selection rules
of thumb, and the mistakes that bite traders most. Print this page or save it as a PDF.

From **The Options Bench** - calculators, guides, and the math behind every strategy.

## Cash-Secured Put (CSP)
Sell a put; set aside cash to buy 100 shares if assigned.

- Cash required (per contract): strike × 100
- If expires worthless: keep the premium
- If assigned (stock ≤ strike at expiry): buy 100 shares at strike; effective cost basis = strike - premium
- Return on capital (if worthless): premium ÷ strike
- Annualised: return × (365 ÷ days to expiration)

When to use: you would happily own the stock at a lower price and want income while waiting.

## Covered Call (CC)
Own 100 shares; sell a call against them.

- If expires worthless: keep the shares + the premium
- If called away: sell 100 shares at strike; total $ profit = (strike - cost basis + premium) × 100
- If-called return (on today's capital): (strike - price + premium) ÷ price
- Static return (if worthless): premium ÷ price
- Downside protection: premium ÷ price
- Breakeven on the shares: cost basis - premium

When to use: neutral to mildly bullish on a stock you are happy to sell at the strike.

## The Wheel
CSP -> if assigned, sell a CC -> if called away, back to CSP. Loop.

- Track one number cycle-to-cycle: total net premium collected to date
- Effective cost basis: assignment strike - (total premium ÷ shares)
- Goal: drop the effective cost basis below where the stock recovers to

Cardinal rule: only run the wheel on a stock you actually want to own.

## Rolling a short put (when it goes against you)

- Net credit on a roll: (new premium × new contracts - buyback × old contracts) × 100
- New breakeven: new strike - (total net premium ÷ shares)

**Three repair stages - always use the lowest that pays:**

- Roll DOWN and OUT - same contracts, lower strike, still a net credit
- Roll STRAIGHT OUT - same strike, later, for a net credit
- EXPAND and roll down and out - add contracts to fund a bigger drop; ties up more capital - last resort

Always aim for at least a small net credit. A debit roll defeats the point.

## Strike selection cheat-sheet

| Delta | Roughly P(in-the-money) | Use case |
| 10-15 | 10-15% | Far OTM; small premium. Low assignment odds - thin cushion if the market drops hard. |
| 25-30 | 25-30% | Standard income strike - the CC / CSP sweet spot |
| 40+ | 40%+ | Aggressive; high premium and high assignment chance. Pick when you actively want assignment. |

By distance: **4-7% out of the money** for the standard income strike.
By DTE: **30-45 days** is the time-decay sweet spot for selling.

## ⚠ Common mistakes

- Chasing fat premiums on volatile stocks. Rich premium = high IV = real risk; one 20% drop wipes out years of income.
- Ignoring ex-dividend dates. In-the-money calls are most likely to be assigned early the day before a stock goes ex-dividend.
- Rolling for a debit. Paying out of pocket to roll defeats the income mission.
- Expanding contracts too early. Stage 3 of the repair sequence ties up far more capital - exhaust Stages 1 and 2 first.
- Running the wheel on a stock you don't want. On a name you would never hold, one bad cycle ends the wheel.
- Treating annualised return as guaranteed. A 70% figure assumes 12 perfect cycles; real years include assignments, gaps and quiet stretches.

Run the live calculators at theoptionsbench.com - covered call, cash-secured put, wheel,
rolling decision and a multi-leg payoff diagram builder. Read the guides at
/guides/.
For the defined-risk strategies - condors, butterflies, spreads, calendars and diagonals - see how to
set each one up in strategy setups.

Educational only - not financial advice. Options trading carries the risk of significant loss.