Framework
The Repeatability Gate
A five-rule delta-discipline framework. If a trade cannot clear all five rules, it is not a wheel trade — it is something else wearing a wheel costume.
Why a gate exists
A strategy is only a strategy if the same decision rule produces the same answer on the same inputs, no matter the mood of the operator. The moment a trader is making case-by-case exceptions "because this setup feels different," the strategy has degraded into discretionary trading with extra steps. Discretionary trading is a legitimate activity for some people, but it is a completely different risk regime than a systematic wheel, and dressing it up as a wheel is how accounts get quietly destroyed over eighteen months.
The Repeatability Gate is the pre-trade rule set I apply to every prospective wheel trade. A trade that fails any one rule does not get entered. It is not "entered smaller" or "entered with a tighter stop." It is not entered at all. This is the hard part — the entire value of the gate is that it blocks trades you want to take.
The Repeatability Gate — five rules
- Underlying test. Would I voluntarily own one hundred shares of this underlying at the put strike, with no option premium involved, and hold them for five years without losing sleep? If no, the trade fails here.
- Delta band. Put delta is between 0.15 and 0.25 at entry. Above 0.25 is strike chasing. Below 0.15 is underpriced risk with negligible premium. The 0.15–0.25 band is where the math actually works across cycles.
- Expiration band. Days to expiration at entry is between 25 and 50. Shorter is higher theta per day but lower forgiveness. Longer is more forgiving but dilutes theta decay. The 25–50 window is the repeatable sweet spot.
- Position sizing test. If every single cash-secured put currently open were assigned tomorrow, the resulting equity position would be below thirty percent of total account equity. No single underlying, no single assignment event, can break the account.
- Annualized yield floor. The annualized return on locked capital is at least fifteen percent. Below that threshold, the opportunity cost of the cash is not compensated and the trade dilutes the program.
Rule 1: the underlying test
Rule one is the most important and the most often rationalized around. The question is binary. Would I own the shares, outright, at this strike, if there were no option premium? Not "would I own it at a lower price." Not "would I own it if I could exit quickly." At this strike, today.
If the answer involves any conditional — "I would own it if they beat earnings," "I would own it if it dropped another ten dollars" — the answer is no. The put should not be sold. Selling puts on underlyings you don't want to own is not the wheel strategy. It is short-put speculation, which is a valid activity with a completely different risk profile.
Rule 2: the delta band
Delta 0.15 to 0.25 is not a preference. It is the band where the math holds up across a full options cycle. Above 0.25, the frequency of assignment starts to compound adverse outcomes faster than the premium compensates. Below 0.15, the premium is too thin to matter relative to the capital locked up.
When IV is elevated, the same delta pays more premium. That is the market giving you a gift — take it at the same delta, don't push into higher delta to collect even more. The discipline is "same delta, better premium," not "higher delta, even better premium."
Rule 3: the expiration band
Twenty-five to fifty DTE is the window where theta decay is accelerating (most premium loss per day) but there is still enough time value to roll or manage a position that moves against you. Under twenty-five DTE, options are too close to pin-risk to manage comfortably. Over fifty DTE, the daily theta is diluted and capital efficiency degrades.
Friday expirations on standard monthly cycles hit this window predictably. Weeklies can be forced into this window but require more active management.
Rule 4: the position sizing test
This is the rule that saves accounts during a real drawdown. Before entering any put, ask: "If everything I currently have open gets assigned tomorrow, including this one, what does that position look like?" If the resulting equity exposure exceeds thirty percent of account value — either in aggregate or in a single underlying — the new trade fails sizing and is not entered.
Thirty percent is not a magic number. It is a threshold where the account survives a fifty percent drawdown in the assigned position without calling for position liquidation. If you use a different threshold, document it and apply it mechanically.
Rule 5: the yield floor
Annualized return must clear fifteen percent. The formula is (premium collected / strike price) × (365 / DTE) × 100. Below fifteen percent, the trade is not compensating for locked capital, tax friction, and opportunity cost. The money is better in a Treasury ladder.
The fifteen percent threshold tends to be binding during low-IV environments. That is a feature, not a bug. Low-IV environments should see fewer trades, not more.
What the gate does for you
The gate produces three outcomes that compound over years of running the program:
- It blocks the trades you are most likely to rationalize into and most likely to regret.
- It forces each trade to be documentable — you can write down, before entry, why the trade passed. That creates a reviewable record.
- It converts the wheel from a collection of feel-based premium trades into a program with a measurable rule adherence rate. Rule adherence rate is trackable. Feelings are not.
If this is your first wheel program, run the gate manually on every trade for six months. After six months, you will have internalized the rule set well enough that it applies automatically during trade selection. The manual gate is the training wheels; the internalized version is the skill.