Is the Wheel the Best Options Strategy for Income? Here’s How to Trade Options Like Warren Buffett

December 03, 2025 at 17:25 PM EST

Many investors still think options are complicated, or overly risky. But one of the simplest and most powerful income-generating strategies is actually one that legendary value investor Warren Buffett has openly endorsed for decades.

Reinventing the Wheel

Warren Buffett, best known as the CEO and chairman of Berkshire Hathaway (BRK.A) (BRK.B), has famously sold puts on companies he wants to own and sold calls when he wants to reduce exposure or collect additional income. The “wheel” options strategy places that same logic into a simple, repeatable framework.

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The wheel combines two foundational, defined-risk options trades with traditional stock ownership:

Selling cash-secured puts
Selling covered calls

When combined in a strategic pattern, the wheel becomes a repeatable income engine that lets investors collect options premium; acquire shares of the underlying at a discount if assigned; and generate ongoing yield via the sale of calls — all while sticking to tried-and-true, high-quality, long-term stocks.

In a popular Barchart video, Gavin McMaster breaks down exactly how the strategy works and why so many investors rely on it. This article explains the logic behind the wheel, the risks, and the tools you can use to sharpen your edge inside Barchart’s platform.

What is the Wheel Strategy?

The wheel has three steps:

STEP 1: Sell a Cash-Secured Put

You sell an out-of-the-money put on a stock you’d like to buy, selecting a strike price that aligns with your target entry price. Then, set aside enough cash in your margin account to buy 100 shares per contract if assigned at the strike price.

There are two possible outcomes:

If the put expires worthless, you can keep 100% of the premium as your maximum profit, and repeat this step again.
If you get assigned, you buy shares of a stock you’d like to own at your preferred entry price, with the premium collected on the sale of the puts lowering your effective entry price.

Strike prices that are closer to the money offer higher premiums, with a higher probability of assignment. Deeper out-of-the-money puts will provide lower profit potential, along with lower assignment risk.

Once assigned, Step 2 is next.

STEP 2: Sell a Covered Call

Now that you own at least 100 shares, you can sell an out-of-the-money call against the stock. This is known as a covered call, since your risk on the short call is “covered” by your stock holdings.

Covered calls generate steady income while you hold the stock — plus, as a shareholder, you still receive any dividends you’re owed if the stock pays them. This is why many investors refer to the wheel as a “triple income” strategy.

If the stock stays at or below the strike price and the call expires worthless, you keep both the shares and the premium collected on the sale of the option.

Then, it’s back to repeat Step 2 until you achieve Step 3…

STEP 3: A Winning Trade

In this final phase, your shares rally above the strike price of the covered call and are called away. This closes the loop on your winning trade as you lock in gains on the stock, with the premium collected on the option increasing your exit price.

Once those shares are called away, you can return to Step 1 and begin again.

That’s why it’s called the “wheel” — the cycle keeps spinning.

Why Investors Love the Wheel Strategy

1. It pays you at every stage:

You earn premium by selling the put.
You earn premium by selling the call.
You may earn dividends while holding the stock.
You can repeat this indefinitely.

2. It’s controlled, intentional, and systematic.

Not only do you choose the underlying stock, strike price, and expiration date that you prefer, you only get assigned if the market comes to you.

3. It works best on high-quality companies.

The wheel works best on liquid stocks with a variety of strike prices and expiration dates to choose from – think Nasdaq-100 names, blue-chips, leading ETFs, and of course, Buffett stocks.

How to Use Barchart to Run the Wheel Strategy

Barchart gives traders an advantage through:

1. Naked Put Screener

Find high-probability put trades filtered by:

Strike
Days to expiration
Probability of profit
Return %

2. Covered Call Screener

Locate call strikes that:

Maximize yield
Fit your target time window
Align with expected move
Match your risk tolerance

3. Expected Move Charts

See if the underlying stock is expected to test your strike price ahead of upcoming expirations.

4. Profit/Loss Charts

Visualize breakeven, assignment price, IV stats, and maximum gain.

5. Technical Indicators

Check 50-day and 200-day moving averages directly on the chart for trend direction.

Why the Wheel Works So Well for Long-Term Investors

Unlike high-risk trading strategies, the Wheel is grounded in simple rules:

Stick to great companies
Enter at optimal prices
Generate consistent income
Rinse and repeat

It’s the closest thing to “getting paid to invest.” So if you’re looking for steady income, disciplined entries, and a strategy used by pros and long-term investors alike, the wheel is a powerful place to start.

Watch the Wheel Strategy Clip:

Stream the full Wheel Strategy explainer on YouTube
Try Barchart’s Naked Put & Covered Call Screeners

On the date of publication, Barchart Insights did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

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