Wheel Strategy vs Buy and Hold: 3 Years of Real Returns

Every time I write about the wheel strategy, someone shows up in my inbox with the same question. It is a fair one, and it is the only question that actually matters before you learn any of this:

Why not just buy SPY and go do something else with your life?

I have never seen a good answer to that. Not a real one. The options bloggers hand-wave past it. The index fund crowd assumes the answer is obvious and never checks. And nobody on either side puts their own trade log next to SPY's total return and shows you the arithmetic.

I can, because every wheel trade I have made since March 2024 is logged in the open—229 closed trades, winners and losers, with dates and dollar amounts. So I pulled all of it, computed how much capital each trade actually tied up, and compared it to what the same money would have earned sitting in SPY.

The answer is more interesting than either side would like.

How I Made This a Fair Fight

Most return comparisons in the options world are garbage because of the denominator. A trader will tell you he made $2,000 on a trade that "only risked $500" and call it a 400% return, quietly ignoring the $30,000 the position had parked as collateral the whole time.

So here is exactly what I did, and you can check my work against the public trade log.

For every wheel trade, the capital committed is the strike price times 100 times the number of contracts. That is what a cash secured put actually ties up. If I sell one $40 put, $4,000 of my account is spoken for until that trade closes, whether the premium was $50 or $500. Covered calls are counted the same way, because the shares backing them are capital I cannot spend elsewhere.

Then I walked forward day by day and averaged how much capital was committed across the whole year. Not the peak. Not the amount at risk on the best day. The time-weighted average, including every stretch where I was sitting mostly in cash waiting for a setup.

That average is the number I divide my profit by. And it is the same number I hand to SPY. If my wheel account averaged $66,139 committed in 2025, then buy and hold gets $66,139 too, and earns SPY's full total return with dividends reinvested.

That is as apples-to-apples as I know how to make it, and it is deliberately unkind to me—the cash sitting idle between trades drags my number down while SPY's version of that same cash is fully invested the entire time.

The Three-Year Scoreboard

Here is the whole thing. My real profit, the average capital it took to produce it, and what SPY did over the same window.

One caveat on that 2024 row, because I am not going to let it slide. I started wheeling in March 2024, so my number covers ten months while SPY's 24.89% covers twelve. The comparison flatters SPY. It also does not matter much, because I was still figuring the strategy out that year and I would not have beaten the index either way.

Now the version that actually answers the question. Forget percentages—here is what happens if you take the exact same pile of money and put it in SPY instead.

Two and a half years of active options trading, 229 closed positions, and the total edge over doing nothing is $7,512.

That is a real number and it is a real win. It is also not the number most options marketing wants you to see, which is precisely why I am showing it to you.

The Comparison Period Is Rigged Against Me

This is the part I would skip if I were selling you something.

SPY returned 24.89% in 2024 and 17.72% in 2025, and it is up another 13.55% through early September 2026. That is three consecutive strong years. If you had picked a random 30-month window from the last century to test "can active options income beat the index," you could hardly have picked a harder one.

And the wheel is structurally handicapped in exactly that environment. When I own shares and sell a covered call at $75, I have agreed to cap my gain at $75. If the stock rips to $95, I collect my premium and wave goodbye to twenty dollars a share. Buy and hold catches all of it. In a melt-up, the wheel is bringing a metronome to a rocket launch.

So read the scoreboard with that in mind. The wheel beat a raging bull market by $7,512 while wearing a weight vest. The interesting question is what happens when the market goes flat or down—because that is when premium selling stops being handicapped and starts being the only thing in the account making money.

I got a preview of that in 2025. My other strategies had a brutal first quarter that year, and I wrote up the whole ugly thing in what I learned from my 2025 losses. The wheel kept producing straight through it. That is the actual argument for premium selling, and a three-year bull run is the one environment where you cannot see it clearly.

The Ride Was Very Different

Two strategies can land on similar returns and put you through completely different years. Returns alone hide that, so here is the same period measured by how bad it got.

Between February 19 and April 8 of 2025, the S&P 500 fell from a record high to a closing low of 4,983—a peak-to-trough drop of about 18.9% in seven weeks. On a $66,000 index position that is roughly $12,500 of your money gone, on paper, with nothing to do but hold on.

My wheel over those same three months: February +$1,428, March +$1,924, April −$66. Two good months and one basically flat one, while the index was having its worst stretch in three years.

The worst month the wheel has had in this entire run is January 2026, at −$1,519. Against roughly $70,000 of committed capital that is a 2.2% dent. My deepest hole is a rounding error next to the index's.

Now the caveat, because that comparison is not quite as clean as it looks. My monthly numbers are closed trades. If a stock I have been assigned drops 20% and I keep selling calls against it, the premium shows up as green in the log while the shares themselves are underwater and that paper loss does not appear anywhere in those figures. During the 2025 correction I happened not to be holding assigned shares, so the numbers above are honest. In a worse-timed drawdown they would not tell the whole story.

Still, the shape of the thing is real. Buy and hold gives you higher highs and much deeper holes. The wheel grinds out a flatter line and asks for your attention every week in exchange. Which one you can actually live with matters more than a few percentage points of return.

Now Subtract the Taxes

Here is where a lot of options income math quietly falls apart.

Almost every dollar of wheel premium is a short-term capital gain, taxed at your ordinary income rate. Not 15%. Your rate—22%, 24%, 32%, whatever bracket you land in. And you owe it the year you earn it.

Buy and hold plays a completely different game. Hold SPY more than a year and your gain is long-term, capped at 15% or 20% for most people. Better still, you owe nothing until you sell. That unpaid tax stays invested and compounds for you, sometimes for decades.

Run 2025 through that filter and the picture changes:

In my best year against the index, in a top bracket, in a taxable account, the wheel's advantage shrinks from $8,671 to about $1,100. All that work for roughly a rounding error.

There is a fix, and it is not subtle: run the wheel inside a Roth IRA. Every dollar of premium stays yours. No short-term rate, no quarterly estimates, no wash sale bookkeeping headache. The entire tax column above goes to zero and the wheel's edge goes back to its full pre-tax size. I walk through how I set this up in my guide to running the wheel in an IRA, and if you take one practical thing from this whole article, take that.

What This Costs in Hours

Buy and hold has a time commitment of roughly zero. You set up an automatic transfer and then you are done, forever. That is not a small advantage, and it deserves to be in the math.

The wheel is not a full-time job, but it is not free either. My honest accounting:

• Monday morning, about an hour. Scan for setups, check what expires this week, decide what I am opening.
• Roughly 20 minutes a day. Check open positions, close anything that has hit my profit target, watch for trouble.
• An extra hour or two some weeks. Rolling a position that has gone against me, or handling an assignment and flipping into covered calls.
• A few hours in January. Taxes. Hundreds of short-term transactions do not sort themselves.

Call it three hours a week, which over the two and a half years in this comparison comes to somewhere around 390 hours. Divide the $7,512 edge by that and the wheel paid me about $19 an hour above what I would have made watching Netflix with my money in SPY.

I want that sentence to land, because it is the one nobody in this industry will say out loud. If you are evaluating the wheel purely as an hourly wage against an index fund, over these particular three years, it is not a great wage.

Two things make me keep doing it anyway.

First, the hours do not scale with the money. Running $70,000 and running $200,000 take almost exactly the same three hours a week—same scans, same decisions, bigger contracts. Triple the account and the effective wage triples with it. That is the real argument for building capital before you judge the returns.

Second, I would be reading about markets anyway. I enjoy this. If you would rather be doing literally anything else on a Monday morning, that is not a character flaw—it is a genuine reason to buy the index and go outside.

The Part the Numbers Do Not Capture

Two strategies can produce similar returns and feel nothing alike.

Buy and hold is boring in the good way and brutal in a specific way: the drawdowns are total and there is nothing to do about them. In 2022 an S&P investor watched roughly a fifth of their net worth evaporate over nine months with no lever to pull. The strategy's whole demand on you is that you sit there. Most people cannot, which is why the average investor underperforms the fund they own.

The wheel is the opposite trade emotionally. Something happens every single week. Premium lands in the account, which feels wonderful. But you also get assigned on a stock that just gapped down 12%, and now you own it, and you have to decide whether to sell calls against a loss or wait. There is always a decision available, which means there is always a way to make things worse.

I have made things worse plenty of times. I lost $555 on INTC across three trades and $516 on RIVN. Those are on the results page next to the winners, which is the whole point of publishing them.

If you are honest with yourself and you know you make bad decisions under pressure, buy and hold's lack of levers is a feature, not a bug. The strategy protects you from you.

When Buy and Hold Actually Wins

I run the wheel, I teach the wheel, and I still think most people should buy the index. Here is when that is clearly the right call:

• You have under about $5,000. You cannot diversify enough for the math to be reliable. I wrote a whole guide on running the wheel with a small account and even there my advice is to be patient about it.
• You have less than a few hours a month. A half-managed wheel is worse than no wheel. Expirations you forgot about turn into assignments you did not plan for.
• High tax bracket, taxable account, no IRA option. See the table above.
• You are certain we are in a long bull run. Covered calls cap your upside. If everything only goes up, capping the upside is the worst thing you can do.
• Markets stress you out. Weekly decisions multiply weekly opportunities to panic.

When the Wheel Wins

• Flat, choppy, or mildly down markets. This is the whole case. When SPY goes sideways for eighteen months, buy and hold earns roughly nothing and premium selling keeps collecting. My 2025 numbers were built partly on exactly that kind of chop.
• You need cash flow now. Index gains are paper until you sell shares. Wheel premium is cash in the account this month. If you are retired or supplementing income, those are not the same product.
• You have a Roth or traditional IRA to trade in. The tax drag disappears and the edge stays whole.
• You have $50,000 or more. Enough to hold five to eight positions and let probability do its job instead of getting wrecked by one bad ticker.
• You will actually run the system. Rules for entries, rules for exits, rules for sizing—followed every week, not just the fun weeks.

What I Actually Recommend: Do Both

The vs. framing is the trap. I do not run the wheel instead of owning index funds, and almost nobody sensible does.

Here is the structure I would give a friend who asked. Keep the large majority of your long-term money in broad index funds and never touch it. Then carve off a sleeve—20% or 30% of your investable assets, in a Roth IRA if you have one—and run the wheel there.

That arrangement does a few things at once. Your retirement does not depend on you being a good trader. The sleeve is small enough that a bad year is survivable and large enough that a good year is worth the hours. You get real cash flow without giving up the compounding engine underneath. And you find out with real money, on a small scale, whether you are actually the kind of person who will do this every Monday for a decade.

Most people who try the wheel discover they are not. That is genuinely useful information and it is much cheaper to learn on 20% of your money than on all of it.

So, Is Options Trading Worth It?

For me, over the last two and a half years: yes, but by less than I expected, and not for the reason I expected.

$35,193 in profit. About $7,512 of that is genuine outperformance over just holding SPY, and that was earned during three of the friendliest years the index has had in a long time, while covered calls capped my upside the entire way. Before taxes it is a clear win. In a top bracket in a taxable account it nearly disappears. In an IRA it stays whole.

The wheel's real argument was never that it beats a bull market. It is that it produces income when the market produces none, and that it puts a lever in your hand during the stretches when buy and hold asks you to just sit there and take it. The last three years barely gave that thesis a chance to show itself.

If you want to see whether it holds up, do not take my word for it. The trades are all posted as they happen, wins and losses, and they will keep being posted through whatever the next few years look like. That is the only version of this comparison worth reading—the one you can check.

And if you want to understand how the trades in that log get chosen in the first place, start with the complete wheel strategy guide.

Related Topics: Wheel Strategy vs Buy and Hold, Is Options Trading Worth It, Wheel Strategy Returns, Options Trading vs Index Funds, Beat the S&P 500, Selling Options for Income, SPY Total Return Comparison, Options Trading Time Commitment, Passive vs Active Investing, Wheel Strategy Results