Wheel Glossary
Adjusted cost basis in Wheel Trading
Adjusted cost basis means your share basis after assignment credits, return of capital, and other basis-affecting events. It matters because it tells you the real break-even on shares held through the wheel.
Definition
Your share basis after assignment credits, return of capital, and other basis-affecting events.
- Translate the term into position sizing and trade management, not just vocabulary.
- Ask how the term changes your entry, adjustment, or exit.
Why it matters in the wheel
It tells you the real break-even on shares held through the wheel.
- A useful definition should change what you track each week.
- If the term does not affect capital, assignment, or premium quality, it is usually secondary.
Common mistake
Subtracting every option premium from share basis even when it should stay in option P/L.
- Most wheel errors come from skipping the denominator behind the term.
- Write the term in plain language inside your trade notes before you use it.
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