Wheel Glossary
Premium yield in Wheel Trading
Premium yield means option premium divided by the collateral or capital tied to the trade. It matters because it is a direct way to compare income opportunities across names.
Definition
Option premium divided by the collateral or capital tied to the trade.
- 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 is a direct way to compare income opportunities across names.
- 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
Comparing yields without adjusting for days to expiration.
- 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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