What is gross completed-cycle P/L in the stated called-away branch?
Reveal the worked answer
850.
10,850 ending cash−10,000 initial cash; include all legs.
Core Options · OPT-06d · Core
Wheel: called away, repeat or stop
What does the completed cycle earn, and does the next cycle still make sense?
What you will learn and prerequisites
- Explain the mechanism in the lesson question.
- Reproduce the worked comparison and recognize its failure case.
Read first: Cash-secured put, Covered call
Having shares called away ends one set of obligations. It does not require automatically starting another put sale. A new cycle is a fresh allocation decision using current business quality, valuation, volatility and portfolio needs.
Understand the mechanism
Realized P/L should include all share cash flows, option credits and debits, fees and any financing. Premium divided by strike is not a complete investment return if it ignores capital tied up and stock losses. Time and opportunity cost matter as well.
Walk through the process
Close the ledger, compare with an appropriate alternative and review whether the original process was followed. Then decide whether the current entry price is attractive. A successful prior cycle does not establish that the next one has positive expectancy.
A worked example
In the fictional sequence, initial cash was 10,000. The put earned 200, shares were purchased for 9,500, the call earned 150 and shares were ultimately sold at the 100 strike for 10,000. Final cash is 10,850 and gross cycle P/L is 850 before costs and taxes. If the shares instead remained at 70, the same collected premiums would not make the cycle profitable.
Wheel: called away, repeat or stop—worked comparison
Vertical: USD; see stage definitions
Horizontal: Ledger stage / settlement case
1. Fictional example
Read the graph as a data table
| Ledger stage / settlement case | Fictional example |
|---|---|
| 0 | 10,000 |
| 1 | 10,200 |
| 2 | 700 |
| 3 | 850 |
| 4 | 10,850 |
What would invalidate the reading?
Reporting only the profitable called-away branch hides the strategy's long-stock downside. Repeating on a lower-quality stock to preserve premium income changes the risk profile.
Check your understanding
Try the question before revealing its answer. These are reading checks, not trading certification or a site completion record.
What is the critical failure to avoid?
Reveal the worked answer
Reporting only the profitable called-away branch hides the strategy's long-stock downside. Repeating on a lower-quality stock to preserve premium income changes the risk profile.
Explain this risk before treating the example as a decision rule. A correct calculation does not guarantee a favorable market outcome.
Return to the question: What does the completed cycle earn, and does the next cycle still make sense? State the observed facts, the assumptions and the failure condition separately.
Sources, assumptions and downloadable script
External references support definitions and conventions. Worked scenarios and prose are original. No current quotes or dealer inventory are claimed.
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