Income

Tracks the specific portion of your total return derived from premium collection — selling covered calls against long equity positions and selling cash-secured puts (CSPs) against idle capital. Together these represent volatility harvesting: systematically collecting the extrinsic value embedded in options, which decays toward zero at expiration (theta decay). This is a vital metric for income-focused traders because it separates two fundamentally different return sources:

• Market Direction Alpha — returns from being right about price movement
• Volatility Alpha — returns from collecting "rent" on your capital regardless of direction

The two modes of yield enhancement:

Covered Calls cap your upside on an existing long position in exchange for immediate premium income. Each call sold lowers your effective cost basis and increases your total return in flat or modestly rising markets. The tradeoff is forfeited upside if the underlying rallies sharply through your short strike.

Cash-Secured Puts (CSPs) put your idle cash to work while you wait to enter a position. Instead of sitting in a money market earning the base rate, you sell a put at your target entry price and collect premium on top of that base rate — a synthetic dividend on cash. If assigned, your effective cost basis is the strike price minus the premium collected, which is lower than simply buying the stock outright. If not assigned, you keep the premium and repeat.

The Wheel Strategy combines both legs into a continuous income loop:

• Sell Put → generate yield on cash; if assigned, acquire the stock at a discount
• Sell Call → generate yield on the acquired stock position; if called away, close the cycle and restart

How to use it: In a flat or range-bound market, your capital gains P&L may show near zero — but a healthy Yield Enhancement number tells a very different story. Use this metric to evaluate whether your premium collection is genuinely accretive: compare your annualized yield enhancement to the base money market rate you would have otherwise earned. Also watch for cases where covered call premium is modest but frequently forfeited upside is large — the net effect may be negative. Pair this metric with Avg Capture (Winners) and Holding Period vs. Return to tune your strike selection and exit timing for maximum net yield.

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