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Good video. I have been trading the wheel strategy for a while now, It is a money faucet. Stocks and options together make the best business model especially when done with proper system and experience!
Tbh trading is not rocket science, it is inherently complex! You could get all the back information and still blow your account, idk why people don't get this till today. I see no other way to maneuver, manage risk and profit in the markets without a pro aiding you!
Funny enough, I don’t even trade myself! I have my trades handled on a reputable platform by Kevin S Mikan’. He is a veteran stock, futures, fx and options trader. His approach combines technical analysis and risk management. I rely on his guidance and experience to make investing easier and beneficial for me. His strategies are amazing, what's awesome is it has helped in boosting my portfolio and I've stayed green for most of this year. Good man👍🏻
I listened to the video. I get your point that you were trying to keep it straight forward and simple. You clearly have ways to handle things when they go against you. Not sure all of the folks here realize that. And this is just a way to generate cash flow at your discretion. Nice of you to reply to so many comments. Keep up the great work!
Hey Randy, over time I've seen a lot of attention paid to making each option trade (and possibly each stock assigned from option trades) profitable from option trading. And doing this while generating cash flow. I think another way to look at this is to create a portfolio that you want for the long term. Then write calls against the positions that you can. Maybe while construction this portfolio, csp can be used. And the extra cash generated can be used to add to existing or to create new positions. This way you don't need to worry about selling calls lower than the cost basis since you want to own long term. Goal here is to create and own the portfolio and generate cash flow with enough of a buffer to not really worry about having the stock called away. This can work out nicely while not really stressing out about the market fluctuations.
Yes I like that strategy also. We do have a portfolio we started in which we buy stocks outright and are not selling options against it at this time. It’s not that large but is growing every month as we buy more. I’m definitely open to selling options in it possibly once it is large enough in SPX or its mini so no stock is called away and we have to pay capital gains. The goal in that portfolio is to grow in value as well as dividend growth without having to pay much capital gains as a result of selling.
Randy, thanks for making this video. This strategy is not without risks and will require active management. One must come up with their own trading plan and decide how much of their money they would want to commit to this strategy. Thankfully we can play around with paper trading accounts or just use a plain old spread sheet to track imaginary trades. Bottom line is expect the unexpected and have a plan to manage your trades when the unexpected happens.
But what do you do when price drops significantly and you are stock with those shares at higher price.. meaning you will have to sell CC for a smaller premium, unless you want to risk loosing the shares at a smaller price and taking a loss on your principal
We have a whole video playlist on how to repair positions that have gone against you. Here’s that link if you’d like to check it out: ruclips.net/p/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9
You also don’t need to put on the whole position (or use up all your capital) at once. For example in the SPY trade mentioned here, You could sell 4 Cash Secured Put contracts, and if you get assigned you could then sell 3 more at a lower price this would help you dollar cost average at a lower price . At the same time you could sell 4 covered calls on the 4 contracts you got assigned at. If you get assigned the other 3 you can sell a covered call for 7 contracts at the average price of all your 700 shares. Our you could roll the contracts like the other person mentioned.
Thank you for this video, and confirming my thoughts as well. This is absolutely doable, and I am doing this with less capital. My strategy so far has been using the premium to buy more shares of my dividend paying stocks, so I can live of the dividend income and not the option income. I'm not exactly using the wheel strategy, but it has grown my shares leaps (no pun intended lol) and bounds!
Thank you for sharing! I really like that strategy. I’ve been doing the same thing as can be seen in this video: ruclips.net/video/ucvb0ZDrR6U/видео.html
Thank you but I think worth to mention that if price fall significantly, for whatever reason, then you won´t be able to sell covered call at old strike price for high premium. If you sell put at 350 then the price went down significantly, then selling a covered call at 350 will have no high premium or sometimes $.01 premium. You will then need to wait until the price go up again to the level where you can sell again covered call for a high premium, ending up with no cashflow and only waiting for the price to go up again. My recommendation is not to put all money at the same time and average down.
I like your idea about deploying your capital over a period of time if you’re brand new to this and have a larger amount of capital. And I also agree that if the price falls substantially you may not get much for the covered call at the strike you sold, but there are quite a few ways to repair a position like that. A trader doesn’t have to wait until the price goes back up. They can deploy any number of techniques to generate nice cash to help repair the position without having to wait. Here is a whole playlist about ways to repair positions that go bad: ruclips.net/p/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9
What is your strategy when the market drops and selling a covered call is no longer an option? If the market sells off enough the premium for selling a covered call drops to almost nothing.
When the markets drops we tend to be a bit more conservative with our CSPs and more aggressive in rolling them down if they go against us. When assigned a CSP I tend to be more aggressive with my CC strike placement and more aggressive with my repair strategies. I’m also a lot more open to bearish call credit spreads and or naked calls.
@@StockandOptionMyLifeOfLearning spreads and naked options lead to permanent losses, not just paper losses. that's essentially gambling. i dunno. doesn't sound safe
@@dumbcat buying shares straight up can lead to permanent losses as well, it's about mitigating your risk and understanding when to implement a strategy
I wouldn’t sell naked calls on highly volatile stocks, and even the stocks I trade in, which tend to be older or mature companies, I usually trade bearish call credit spreads instead of naked calls.
That is one way you can handle it. However, there are ways to repair option positions that have gone against you. Here’s a playlist dedicated to that: ruclips.net/p/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9
I was wondering what this was going to look like when it came out. Interesting thought exercise. For 80K income I think I would want at least 400K in capital. And looking at the numbers yesterday, and the current market volatility, I would be inclined to sell options at varying strikes, not put all my money in at a single level. I also think I would be inclined to only sell enough to cover my income needs and leave some cash behind for those drops others mentioned in other comments. Based on the comments here, I hope this is an indication we are near a bottom. 2 years ago people would be telling you this is crazy, only generating about 80K off 250K? Why so conservative? Stonks only go up! 🚀🚀🚀 Your videos and breakfast are becoming my Saturday morning routine. Thanks as always.
Mike, I too would want to spread my trades out over time and at different strike prices. A lot of planning needs to be done before the real trading happens.
@Mike Surel - Agree. I like the idea of laddering my DTEs and keep rolling them and either csp or buying more shares when they get assigned. Been toying with how to be flexible and able lower my cost basis when the SPY drops 30/50/80 points. How to best manage with having to sit out during a downturn.
Excellent video …i am doing something similar in my PM account and ironically I do prefer going out further in time and locking it in. You can also do a buy write strategy and go out 3 to 6 months or even up to a year and lock in the income you need to live on for the upcoming year.. great job as always.
Thank you for sharing Richard! I can see at some point if I want to stop trading as much, I’d definitely be open to selling farther dated options like you mentioned. Thank you for your support!
That’s a good point especially now with this down year selling puts a year out is probably a great idea now. more then likely after a big down year on the S&P a massive climb will start again and many people will miss out and your idea I like and use buy only like 2 months out at most but I do it when the market is horrible to look at daily as us option sellers do. And there will probably be a time way before it expires to buy it back with a huge % of the premium collected , why not buy it back and reinvest again and repeat. I know do it quiet often right?
Friday, sold 50 put contracts (5000 shares) MO Jan 20 '23 for $1.75 for $8750 for a 17% annualized C-on-C return.. If I wind up owning it, my new yield on cost will be 8.7% PLUS any new covered call premium I may write.. Using another 90 days, the new "at the money" premium should be around $1.50 to $2
I like this, but if you're living off of the income (premiums), won't you be able to do less contracts over time as the SPY price increases? So, it seems like, as time passes and SPY increases you'd make less because you'd be doing fewer contracts?
If you don't grow your account, then, yes, if the price of the underlying went up, you wouldn't be able to do as many contracts. However, you should get paid more for the contracts you're doing. For example, a $100 strike price cash secure put option will pay a lot more than say a $50 strike CSP.
In a downturn market, this wheel strategy needs some buy put protection just in case we go through big downturn. So although you sacrifice some of the premium collected, one can be at ease IMHO
Great job Randy! You know I’m a huge fan of The Wheel Selling Premium!! If you ever travel to Atlanta or nearby I’d love to meet you. You’re the best!!
When an option has less than 15% of its extrinsic value, we look to exit or roll it. If a position has goes against us, once most of the extrinsic value is gone, and especially if it looks like it might head lower, then we look to do something with the position by rolling it out or rolling it down and out if it’s a cash secured put. If it’s a covered call, then we will look to roll it out, or possibly even roll it down and out as well. I don’t tend to exit a position just because it’s going against us unless something has changed fundamentally with the company. Here is the link to a video series talking through some of the ways that we repair positions that have gone against us: ruclips.net/p/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9
If you’re using delta to enter positions, it will depend on your desired level of risk. However we generally do not position our strikes based on Delta. We position them based on support and resistance.
2:14, Please correct me if I'm wrong. In order for us to sell the put option and collect $6,454, we need to sell 700 option contracts, that means we need to have $24,500,000 in our account. Otherwise, we can't sell 700×$9.22 and get $6,454.
In this video, we are using the example of selling 700 shares worth. Since 1 option contract is equivalent to 100 shares, that would be 7 contracts. It would not be 700 option contracts rather 7 contracts for 700 shares worth. 700 option contracts would correspond to 70,000 shares worth.
@@StockandOptionMyLifeOfLearning That's not the point. you're displaying 「700shares × $9.22 = $6,454」, to do this, we need $24,500,000, don't we? If we sell just 7contracts, its only gonna be $64.54, and even in this case, we need $245,000 in our account.
If you sell 7 contracts or 700 shares worth in this example you’d pocket $6,454 and would need $245,000 if all 7 contracts or 700 shares were assigned to you. $350 strike x 700 shares = $245,000. 7 contracts or 700 shares worth x option premium per share of $9.22 = $6,454 pocketed in this initial trade.
Would you recommend playing SPY with a $10,000 account, using credit spreads or Iron Condors at 30 Delta strike prices? Do you think that would be fairly safe?
I am not a huge fan of iron condors. The reason is that I generally have an opinion of what direction I believe the markets are trading in. However, if you believe that a stock or more specifically, SPY is going to trade sideways, iron condors could be a good way to trade. When it comes to trading short term options, I don’t look at Delta very much. I’m more focused on support and resistance. If you’re newer to option trading, even though you have $10,000 to trade with, I would suggest risking a very small amount of that $10,000. You want to have as many chances as possible to be wrong and still be able to keep playing the game. If you or anyone reading this comment is new to option trading, I would encourage you to watch these videos: ruclips.net/video/pmiphVNQong/видео.html and ruclips.net/video/YWVbALl08mw/видео.html
That’s great for those with a large account, I think WHEEL and covered calls and LEAP is the way to go; what about for those just starting out w a small portfolio of 10k usd, o think credit spreads, naked, iron condors, strangles and debit spreads is the only way to go yeah?
If you know what you’re doing and don’t use much or any margin or leverage, in my opinion, it’s a really good strategy. However, if a trader trieds to use a lot of margin or leverage and doesn’t know what they’re doing, it can wipe them out.
This is brilliant. What if you did these contracts you played it weekly? It would make double or triple the money coming in? What is your advice on that strategy, instead of monthly, do it weekly?
@@StockandOptionMyLifeOfLearning I watched that video and it made sense why monthly is better. What is your opinion on selling a strangle on SPY @ a 30 delta on each side? It would create more income. Both sides could expire OTM or you would have to manage one side and possibly roll out and down or up. Curious your thoughts on that.
I don’t do a lot of strangles because I typically have a market direction I’m leaning towards. I also don’t look at delta much except when I’m trading LEAPS, I’m more concerned with support and resistance. That being said, I know some traders like strangles and trade a lot of them. If a stock were in a sideways pattern I’d definitely be open to strangles.
Hi randy, I want to know. Usually what are you exit strategy after you enter a trade, in terms of profit target and loss target? Example, 50% of premium is your profit target and 150% of premium received is your loss target
The reason I asked this was because I’ve read somewhere that usually ppl take profit at 50% of premium and stop loss to exit trade is 1.5x of credit. However isn’t the risk to reward ratio not balanced, especially when you lose more than what you collected. Thanks and keep up your great content
It is common to use percentages to close out positions and try to match up potential returns with potential loss. However, with the companies we trade in and when we tend to enter positions, I haven’t found that to be tremendously beneficial. So I don’t limit myself by closing them out at 50% profit if it looks likely that the position will continue moving in our favor. I think that might work for some people but for the way we trade, I haven’t really seen that it would be long-term beneficial to us.
If everything plays out according to plan, I look to close positions out once they only have 10-15% of time value left in them. If they don’t go according to plan, then it’s case by case and if the underlying has earnings coming up or not.
@@StockandOptionMyLifeOfLearning also do you tend to use up your entire portfolio to sell options? Example, your 1 mil usd account, do you use up all 1 mil to sell options or maybe only use 50% of your account and the rest leave it in cash
@@StockandOptionMyLifeOfLearning okay, then what’s your way of managing your risk / stop losses for each trade you enter. (Eg. Max loss is 3% NLV per trade) Would like to know how you deal with if it goes to a bad trade?
I think this video just removed a mountain of stress off my back! What would be the downside of going this with a volatile type stocks such as Tesla where premiums are higher?
I am in Tesla and made the mistake of selling 900 shares well OTM .. that's over close to $ 300k at the time of selling.. yeah I got a good premium but now I'm stuck bag holding... I keep rolling over my positions until tesla can recover.. lucky, I don't Retire yet but it's best to bet wayyyy OTM with volatile stocks.. premium is still good and you get out of the market sooner as well
The thing I don’t like about volatile stocks is that usually they’re volatile for a reason. They are usually unproven, low or non profitable companies. I don’t mind potentially doing short positions in them, but I usually don’t like to do bullish positions.
Do you use Lrcx or tesla for wheel strategy? Also im assuming you don't care about holding shares the main objective is to make the premium and get all the cash back ?
At this time, we’re not running the wheel on those two companies. However I’m not 100% opposed to trading options against them in certain scenarios. In our main option trading account, we are mainly focused on generating as much cash flow as possible. However I have a separate account in which we buy stocks and own them for the long term. At this time, we are not selling options against that outright stock ownership account. We mainly want it to appreciate in value and for the dividends to grow. Here’s a video series I made on that account: ruclips.net/p/PL3j38I2YtGw3-1mBr4hEoDiGW-qi0NDAp
Thanks for the vid. I use the wheel but find that often the underlying falls below the strike price of the initial csp. In this case, and after assignment, one may be waiting for some time to collect meaningful premium form a future cc. So, a further lot of csps can be written if funds permit or a sometimes a long period of waiting must be endured. Hence no regular income generated if funds are tied up and calls cant be meaningfully written. Regards from Australia.
Thank you for sharing. I have found that selling options around support and resistance tends to help. Also, if a trader is willing to sell farther out of the money CSPs then they will be less likely to be challenged however the initial return will be less. There are some ways to repair positions that have gone against traders. I discuss some of the techniques we use in this video series: ruclips.net/p/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9
This idea fits with what I would like to do in retirement, thanks for putting this out. However in my cruising around videos and blogs researching, I found some would say SPX would be better as it is cash settled and has better tax treatment. I would like your opinion on this. How would you compare wheeling SPX to SPY? And do you think it's a better way to go, if not, why not?
If you have enough capital, I definitely agree with you that is more advantageous to do it with SPX as compared to SPY. It’s just quite a bit more capital intensive since SPX is approximately 10 x SPY. But if you have that capital, I would definitely prefer SPX over SPY partly because of the tax advantages in the US as well as the European style option. So you don’t have to worry about early assignment.
You can't do the wheel strategy on index funds as they are cash settled. This means you don't own anything at assignment. I'm confused why a guy making videos on the wheel strategy is telling you it would be better. You literally cannot perform it on SPX.
I would posit that the answer to your confusion is in your own comment. Think of it this way. Wheeling is NOT the goal. Wheeling is the result when the crap hits the fan. With SPX, the danger of being assigned period, especially early, has been removed. The cherry on top is the 1256 tax treatment. I have been told that the only time SPY options are allowed to be considered 1256 for tax purposes is if you are a “trader” per the IRS and have made a 475(f) election.
It depends. If you're selling $250,000 worth of options, then that's all you need. However, if you're selling $500,000 worth of options, then, if you're approved for margin, your margin requirement might be a lot less but if they were assigned to you, then you would need the entire amount to cover the position if you didn't want to use margin.
Although I’m willing to trade in SPY, I don’t have an ongoing SPY position in it. The returns are quite a bit better and we can pick better entry spots by trading in individual stocks like we do. However, if I get enough request, I’d consider doing an ongoing SPY position.
Thank you for your support! I haven’t traded in UPRO however we have been doing an experimental position in TQQQ. I don’t feel confident enough to say that I have found a winning formula yet. However our strategy does involve buying twice as many protective LEAPS put options as put options or covered calls we are in. If you trade in it, I think you have to plan for it to go to zero or really close to it during a market crash and that’s why we bought twice as many protective put options.
Thank you for the video. I wonder why they say a retiree needs $80K yearly. Most retiree's like myself have their homes paid for so $0 mortgage to pay. $40K to $50K seems reasonable unless one lives in a high cost of living state. This seems doable and a way to supplement ones SS benefits and IRA's.
Hey James, I agree, it does depend on where you live, and what bills you have. It sounds like you've done an awesome job getting things lined up for you! 👏 That's great to hear!
I have been waiting for you to do a video like this one for a very long time. I’ve seen other people post similar videos, and was not impressed. My plan is to use this strategy to supplement my meager monthly pension when I retire. This video gives me hope that I will be able to retire comfortably. Thanks for this and all of your other videos, Randy.
A little pension a little social security and either a little dividends or Randy’s idea and I bet you’ll have a nice comfortable retirement and won’t have so many taxes as we do from our pay checks every week. And no commute bill either looks like you have a very bright future that’s awesome congrats
The only price you can be assigned at is the CSP strike price. If the stock blows through the CSP strike the challenge then becomes where to sell the CC. We have a whole series of videos on how to repair that situation found here: ruclips.net/p/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9
That’s why you only use stocks that you wouldn’t mind owning. If you sell weekly’s like I do there’s really not much of a chance a highly rated stock is goin to bottom out in a weeks time. Yes it could happen, but if you stay with deltas under 20% the risk is very minimal
I definitely prefer selling options in individual stocks because the return is better and we can pick better entries. However if a trader wanted a simpler way to do the wheel and was willing to accept a lower return, ETFs might be the way to go. Here is a playlist that shows our monthly cash flow of the past 2+ years: ruclips.net/p/PL3j38I2YtGw0W9xSkNpaOw73OmuEA5xf9
Hi Randy. What consideration is there for diversity? I understand there is inherent diversity in the SPY, but what if it gets put to you, then drops 10-20 percent over a month or two, and you can't get a decent call premium? One argument might be that, if SPY was doing poorly, then it wouldn't matter if you were diversified with multiple individual stocks, because everything would be doing poorly. However, there might be a few that would really shine and offer good premiums. I read your responses regarding repairing bad trades, and I guess that mostly answers the question but, I guess my ultimate question is, do you consider an "all in" investment in SPY to be equally diversified as owning individual stocks?
I think it is as diversified as owning stocks. However, personally I don’t think it’s as good or better than trading in individual stocks. I prefer to not use ETFs. The reason is that I can pick when I enter each position. With SPY, especially, if you’re trading ongoingly, you’re trading basically one big stock no matter whether it’s up or down. However, in our main option trading count, we have about 40 positions. So we are diversified and get to handpick when we enter each one of those positions, which I like better. Also, the return should be better than if we just traded SPY. However, it does require more work.
Firstly this is not a SAFE strategy and also you need only about 6k per sale to sell naked PUTS so for 7 puts you need less than 50K to easily lose your money :)
Please see the video I made on the use of margin: ruclips.net/video/XU9LF5KmtJ8/видео.html By the way, I *never* promote the use of margin, especially for a newer or inexperienced trader.
To sell covered calls, you do need to own 100 shares for every contract. To sell cash secured puts, you need to have enough cash to pay for 100 shares for every contract, in case you get assigned.
Who knows, but we may be nearing a bottom Randy. Look at the generally negative, worst case comments. It's easy to be critical of a stretegy and find fault when looking back, but I didn't hear a better strategy from anyone to generate cash flow on stocks they own/would like to own. And, when the market turns around and you're not in, good luck. You've probably seen the studies that show the small number of good days in the market drives overall, longer term performance. 💪💪💪
It’s interesting the people who haven’t considered the other possibilities like holding cash and inflation eating away at the value of it or if they owned stocks out right and had not sold options, they’d be quite a bit worse off. But it’s interesting to see what people say, especially the ones that make well thought and informed observations. I always appreciate those and laugh at the ones that haven’t thought through what they’re saying. 🤓
if somebody finds risky or stressful to sell puts on spy please move to working all your life in your “secure job”, the guy actually have a legit almost non directional strategy with an edge that is not gambling that the real traders use, while you “dont risk” buying long options
Not clear to me. OK, you collect $6545 if the put expires worthless. If the put is in the money and you get exercised at 350 what happens to the $6545? Your risk is that you have to buy the stock at whatever price SPY is below 350 and have the shares to surrender to the put buyer.
No matter what, you get to keep the option premium you received upfront when you sell an option. Here is a video that teaches all the basics of option trading if you’d like to check it out: ruclips.net/video/bKLxEY3BolY/видео.htmlsi=BUvDEvJL-KC1Vptd
It's not a bad strategy when the premiums are high but in a low vix environment, I think if you have that much cash then you can easily make more deploying iron condors or even good old vertical spreads. Heck, there are people on RUclips who make a living selling SPX 0dte options with extremely low deltas. Obviously that needs a good stop loss, which is not very hard. If a person can throw 20K easily on one trade, they can make much more than the wheel. But obviously the vix can go up anytime. In that case the investor needs to change the strategy. I think agility is the key here.
Thank you for sharing your thoughts. There are definitely strategies in which you could use leverage to make more income. You just have to be prepared for when the market goes against you and understand how much you're going to lose of all the previous months profits when that happens. I have traded leveraged and margined up strategies. I found the one I currently use is the best long-term strategy I've ever traded. We don't stick to just the wheel strategy, we use other techniques, but the wheel is the foundation of a good portion of our strategy. I called it the upgraded option wheel strategy.
The wheel strategy is fun, but to present this as an approach to retirement, and risking the whole capital is insanity. If SPY drops hard, which it did in the last few weeks, you are stuck with the stock and no way to generate cashflow until it comes back up. To think this is realistic to do with 100% of your capital is misleading and dangerous..
Thank you for sharing your thoughts. I disagree with you. I’ve been doing it for a long time. In fact, I’ve done it not only with stock and option trading but with several other assets in which I risked real and most or all my money. It’s how you manage that risk that determines success or failure and if you do it with knowledge and discipline or not.
@KrahsThe "The wheel strategy is fun, but to present this as an approach to retirement, and risking the whole capital is insanity." What strategy during a bear market are you using, that earns decent income, preserves your capital, and you don't consider it insanity? IF YOU ARE WILLING TO READ THROUGH THE WHOLE POST, YOU WILL LEARN A NEAR FULLPROOF METHOD THAT FEW ARE TEACHING. During 2021 I increased my portfolio by 45% using the Wheel Strategy in a modified way. I would sell weekly, SLIGHTLY out of the money puts, (FOR HUGE PREMIUMS), and let them expire in the money only if they were in the money by less than 2%. If the put was in the money by MORE than 2% on the Thursday before expiration, I would roll the strike down one strike price, and far enough out to an expiration that earns a net credit. Anytime the put was more than 2% in the money on the Thursday before expiration, I would continue to roll down one strike price and far enough out to an expiration that earns a net credit. Rinse and repeat until the strike of the put is brought down to an at the money strike. This method prevents getting assigned to a falling knife, and you get PAID to wait until the stock finds the bottom. Once I owned the stock, I would sell weekly, SLIGHTLY out of the money covered calls. This earns HUGE PREMIUMS. During a bull market, if the strike becomes in the money, on the Thursday before expiration, I roll the strike up one strike at a time, and far enough out to an expiration that earns a net credit. Even as the strike continues to be in the money, I have rarely been exercised early. Rinse and repeat rolling up one strike at a time, and far enough out to an expiration that earns a net credit, anytime the strike is in the money, the day before expiration. If the strike is slightly out of the money, I roll with the same strike, and out to the next expiration for a nice net credit. If the covered call strike is DEEP out of the money, I roll the strike all the way down to the at the money strike, to earn HUGE premiums. I do not have a problem selling covered calls with the strike BELOW my cost basis. During the bear market I follow the share price with my strike to keep it at the money, for HUGE premiums. Anytime the stock price goes up, above the strike, I go back to rolling up one strike and out far enough to earn a net credit. Rinse and repeat rolling up one and out, to earn net credits, until the strike becomes out of the money again. Then I go back to selling at the money strikes. I have sold thousands of covered calls and cash secured puts, with MANY of them becoming in the money the day before expiration, and I have successfully rolled them for net credits, and avoided assignment. I have NEVER had a net loss. I have always continued rolling until the last option in an extended rolling campaign expires out of the money. Out of the thousands of options I have sold, only 3 have exercised early. You just need to monitor the EXTRINSIC value of the premiums when the option goes deep in the money. My rule of thumb, is when the EXTRINSIC value of the premium is $0.10 or less, I roll for a net credit. Buyers are motivated by profit. Buyers lose the extrinsic value of the premium when they exercise early. They make MORE money by selling their option, than exercising the option, and losing the EXTRINSIC value of the premium. There is an exception. If a dividend stock has an ex-div date on the Thursday before expiration day, and the Covered call is in the money, or even slightly out of the money, the buyer could still profit from exercising on Wednesday to qualify for the dividend. I sold a covered call on a dividend stock that was exercised on Wednesday, the day before the ex-div date. I thought I was safe because the strike price was $0.25 out of the money. I was wrong, because the dividend he received was $0.75 and he made a net profit of $0.50 per share. I had 10 contracts. Ouch. If I had known then, what I know now, I would have rolled my covered calls on Wednesday, out to the following expiration day, and saved my dividends. "The wheel strategy is fun, but to present this as an approach to retirement, and risking the whole capital is insanity." Quite the opposite. Knowing HOW to roll your in the money options is the safest and surest way to earn HUGE income during a bear market, neutral market, or bull market, AND preserve your capital. Sure, a deep in the money put will create a drawdown of your account value, the same way that owning stocks that fall in price create the same drawdown. The difference is that you can recover from that drawdown FASTER, by continuing to roll the put strike down as the share price falls, then when the put strike becomes at the money, you can buy the shares, at the bottom, BEFORE the stock begins to recover. And by keeping the shares you own, collect the dividends, AND collect a huge premium from selling the first covered call strike, at the money, AND rolling the covered call up one strike at a time, and out to a farther expiration for a net credit, whenever the strike becomes in the money, you will also avoid assignment, preserve your capital, and get PAID to do it. "We can't change the direction of the wind, but we CAN adjust our sails." Knowledge IS power, ONLY if you apply that knowledge.
Trading the Wheel myself, the issue in my view is not that it absolutely can be a great source of income. But to position it as a solid retirement plan and as the only source of cash is questionable. You will require to stomach hefty draw-downs, depends on a neutral-bullish market and requires discipline in cash/margin management.
@@tomstock9546 The drawdown from selling cash secured puts, is not any worse, than already owning the stocks, and the drawdown they experience, in a bear market. Example: You buy a stock at $100 per share, at the same time I sell an at the money CSP with a $100 strike price, and I earn a $2 premium. Your cost basis is $100, and if I get assigned, my cost basis will be $98 per share. I'm already ahead, at the start. If you stock price falls to $80, you have a drawdown of 20%. My put is deep in the money, and my account shows the same 20% drawdown as your account does. BUT, I AM STILL AHEAD $2 PER SHARE FROM EARNING THE $2 PER SHARE PREMIUM. I can also roll the strike price out to a farther expiration to avoid assignment. You don't have that advantage with owning the shares. Think it over.
if the stock dumps and you’re playing wheel strategy you should be selling covered calls on the way down and banking. Ideally keeping half of your capital for when it’s time to sell cash secure puts at the bottom. When it bottoms you sell your covered calls above your cost basis with a expiration that is farther out and if it does ever hit you’ll be selling for a profit and not a loss while still collecting premium on the puts. Very low risk.
I was trying to keep this video as short and simple as possible. You would have to decide which is more important, generating as much cash flow as possible or continuing to sell options at the strike price that you bought the stock at. However, here's a playlist on how to repair positions when they've gone against you: ruclips.net/p/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9
@@StockandOptionMyLifeOfLearning a more safe approach is to buy in tranches … u sell puts (and calls if assigned) but u gotta be ready to add more if price slips.. for example u invest 300 k and use 100 k every time price drops … u gotta be smart with ur interval though
if the Put is assigned, and the market does not move favorably, seeking calls may not work, significant losses may accrue, and the the person making that trade does not have a job.
Look at the view and comment count. Outperformer! Looks like you hit on a potent mix: retirement and options. Lots you could do with that. Maybe that's a theme for awhile, if you don't mind all of the ridiculous comments. 🤑🤑🤑
Here is a playlist dedicated to my option trading cash flow over the past several years: ruclips.net/p/PL3j38I2YtGw0W9xSkNpaOw73OmuEA5xf9&si=HEvDMhkrgsRRU5L9 I’m working on a video right now that will show the cash flow generated the last couple months of 2023. I also post my main option trading account statements on my Patreon for everyone to see, patrons and non-patrons.
Not sure how well the wheel would work in a year like 2022, where they market declines so much. You are forced into selling calls under your cost basis, or high enough that you collect very little premium. I believe this strategy has been back tested and falls apart over longer periods.
We call it our upgraded version of the wheel strategy. We don’t blindly follow the wheel strategy. Sometimes, it’s better to adjust your positions than just blindly close your eyes and hit a button.
Here’s a video you might find interesting about this exact subject: ruclips.net/video/UC6WSikYzqE/видео.html When you compare the strategy to outright stock ownership, it definitely beats it in bear markets, usually sideways markets, and can even potentially beat it in a bull market depending on how strong the bull market is. But the wheel strategy just a piece of how we trade. We don’t limit ourselves to just that strategy although it is the foundation for a big part our overall trading strategy.
If SPY tanks, and you’re only willing to sell at the price you bought it at, your income will definitely go down. However, there are quite a few techniques you can use to repair positions that have gone against you. Here’s a whole playlist dedicated to that: ruclips.net/p/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9
You missed part of the income picture. If SPY climbs past the point to which you have to sell puts at a strike higher than 357.65 to make your income goal your ability to purchase 700+ shares is now reduced to 699 which means you can only do 6 contracts which then reduces your income by over 14%. That then pushes you to higher deltas and lower capital appreciation and eventually....a bad investment. Your only hope at that point is a bear market so you can deal with more contracts or that you didn't need the full $6,600 per month and reinvested everything in excess of your spending plus the hope that you reinvest enough and at a high enough rate to maintain at least 7 contracts. Your video what just the rosey positive side with the strategy not moving against you, which would be a market that rises away from your ability to harvest what you need while reducing the number of contracts you can use.
There are definitely strengths and weaknesses to every trading strategy and technique. A trader has to determine which one(s) best fit their risk tolerance and goals. Here are several other videos about trading the wheel strategy that show all sides of it, good and bad: ruclips.net/p/PL3j38I2YtGw2DJsqiZnE4hx2jzsizcyRy
A COVID-style drop (without the instant FED-fueled rebound) would leave you with many months of not being able to sell calls above your break even, though. 250K is not enough of a buffer to survive a bear market. Everything has to go according to plan all the time with such a small portfolio. I wouldn't recommend it.
There are ways to protect your portfolio: ruclips.net/video/910pc4WbGRs/видео.html And ways to repair positions when they go against you: ruclips.net/p/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9
Hey Joshua, thank you for the suggestion. It's in the description but I'll also post it here: Disclaimer: I am not a financial planner and am not offering investment advice. This is an opinion channel only and should not be taken as any form of financial advice. The ideas and strategies that I discuss should never be used without first assessing your own personal/financial situation, or without consulting a financial and/or tax professional. There are financial risks involved in taking on any monetary transaction that I discuss in my videos. I may receive a small commission from the purchase of any item from using the links listed above.
I did the math based on how many days that option had to expiration. Since there's 30.4 days per month, and the option we were using as example was 33, we had to divide it by the number of days until expiration x the number of days in an actual year.
this video is misleading by ignoring huge risk of option trading. if somebody use this strategy at the beginning of this year, he would be in huge loss and would only get some pennies if he doesn't sell calls at strike much lower than his SPY entry price.
Maybe you missed the part where I mentioned you could sell cash secured put options at a lower strike price to decrease risk. 🤷🏽♂️ If somebody owned stocks at the beginning of this year, they would most likely be down more than if they did this strategy. The only way they might potentially be better is if they shorted the market, which is unlikely, or if they were in cash, then inflation has eaten away at a chunk of that value and when the market turns, they’re going to miss out on potentially an opportunity that won’t come around for another 3 to 5 years.
@@StockandOptionMyLifeOfLearning instead of playing with SPY wheel, what is your opinion about SPX covered call ETF like XYLD, which gives 12% dividend and ETF price is almost flat in last 5 years. 12% yearly gain sounds good, it would double the account in 6-7 years.
@@lizhongshen XYLD, RYLD, QYLD all have poor premiums. Earning large premiums are more important than dividends. If you like the safety of ETF's, go with one of the sector ETF's, like XLE, or XLU. OR, if you have the stomach for volatility, AND you know how to roll properly, for net credits, try selling cash secured puts, and then covered calls on the 3x leveraged ETF's, SOXL, TNA, TQQQ and UPRO. They cover the major markets, and have insanely high premiums. I don't use UDOW because they don't support weekly options. Weekly options are the only way to go, IMHO.
There are ways to repair option position that have gone against you. Here’s a whole playlist dedicated to that: ruclips.net/p/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9
this aint gonna work , market is smart . you might be able to get that first premium the first time you sell puts , but when you get assigned and its time to sell covered call , trust me you wont get that ideal premium you want anymore.
Sometimes the market is too "smart" and pushes it stocks into way overvalue territory... and sometimes the market is too "smart" and pushes stocks below what most professional knowledgeable traders would consider a good price. I guess it depends on what I traders definition of "smart" is. However, you are correct in that, generally, you'll get a bigger premium on the first option you sell. Then if the market is not located close to the strike price that you're selling in subsequent rolls, it could/would be lower. That's one reason why we trade a lot more in individual stocks, because we are able to take advantage of a lot more different opportunities than just SPY. Here's a playlist that shows a track record of this strategy: ruclips.net/p/PL3j38I2YtGw0W9xSkNpaOw73OmuEA5xf9
Absolutely. Just please make sure you understand what might happen to those 2 ETFs in a worst case scenario. They tend to be a bit more volatile than SPY.
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Good video. I have been trading the wheel strategy for a while now, It is a money faucet. Stocks and options together make the best business model especially when done with proper system and experience!
Thanks for sharing
Good for you! I just started few weeks back and hopefully I’m aiming to achieve profitability soon enough. I’m on it!
Tbh trading is not rocket science, it is inherently complex! You could get all the back information and still blow your account, idk why people don't get this till today. I see no other way to maneuver, manage risk and profit in the markets without a pro aiding you!
@@MHousley Honestly I'm confused ... I don't know what to do to
get results. I'm feeling extremely overwhelmed
Funny enough, I don’t even trade myself! I have my trades handled on a reputable platform by Kevin S Mikan’. He is a veteran stock, futures, fx and options trader. His approach combines technical analysis and risk management. I rely on his guidance and experience to make investing easier and beneficial for me. His strategies are amazing, what's awesome is it has helped in boosting my portfolio and I've stayed green for most of this year. Good man👍🏻
I listened to the video. I get your point that you were trying to keep it straight forward and simple. You clearly have ways to handle things when they go against you. Not sure all of the folks here realize that. And this is just a way to generate cash flow at your discretion. Nice of you to reply to so many comments. Keep up the great work!
you're one of the best! thanks for the tips!
Hey Randy, over time I've seen a lot of attention paid to making each option trade (and possibly each stock assigned from option trades) profitable from option trading. And doing this while generating cash flow.
I think another way to look at this is to create a portfolio that you want for the long term. Then write calls against the positions that you can. Maybe while construction this portfolio, csp can be used. And the extra cash generated can be used to add to existing or to create new positions. This way you don't need to worry about selling calls lower than the cost basis since you want to own long term. Goal here is to create and own the portfolio and generate cash flow with enough of a buffer to not really worry about having the stock called away.
This can work out nicely while not really stressing out about the market fluctuations.
Yes I like that strategy also. We do have a portfolio we started in which we buy stocks outright and are not selling options against it at this time. It’s not that large but is growing every month as we buy more. I’m definitely open to selling options in it possibly once it is large enough in SPX or its mini so no stock is called away and we have to pay capital gains. The goal in that portfolio is to grow in value as well as dividend growth without having to pay much capital gains as a result of selling.
Randy, thanks for making this video. This strategy is not without risks and will require active management. One must come up with their own trading plan and decide how much of their money they would want to commit to this strategy. Thankfully we can play around with paper trading accounts or just use a plain old spread sheet to track imaginary trades.
Bottom line is expect the unexpected and have a plan to manage your trades when the unexpected happens.
Great advice Ed! Thank you for that and for your support.
But what do you do when price drops significantly and you are stock with those shares at higher price.. meaning you will have to sell CC for a smaller premium, unless you want to risk loosing the shares at a smaller price and taking a loss on your principal
We have a whole video playlist on how to repair positions that have gone against you. Here’s that link if you’d like to check it out: ruclips.net/p/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9
You also don’t need to put on the whole position (or use up all your capital) at once. For example in the SPY trade mentioned here, You could sell 4 Cash Secured Put contracts, and if you get assigned you could then sell 3 more at a lower price this would help you dollar cost average at a lower price . At the same time you could sell 4 covered calls on the 4 contracts you got assigned at.
If you get assigned the other 3 you can sell a covered call for 7 contracts at the average price of all your 700 shares.
Our you could roll the contracts like the other person mentioned.
Thank you for this video, and confirming my thoughts as well. This is absolutely doable, and I am doing this with less capital. My strategy so far has been using the premium to buy more shares of my dividend paying stocks, so I can live of the dividend income and not the option income. I'm not exactly using the wheel strategy, but it has grown my shares leaps (no pun intended lol) and bounds!
Thank you for sharing! I really like that strategy. I’ve been doing the same thing as can be seen in this video: ruclips.net/video/ucvb0ZDrR6U/видео.html
Thank you but I think worth to mention that if price fall significantly, for whatever reason, then you won´t be able to sell covered call at old strike price for high premium. If you sell put at 350 then the price went down significantly, then selling a covered call at 350 will have no high premium or sometimes $.01 premium. You will then need to wait until the price go up again to the level where you can sell again covered call for a high premium, ending up with no cashflow and only waiting for the price to go up again. My recommendation is not to put all money at the same time and average down.
I like your idea about deploying your capital over a period of time if you’re brand new to this and have a larger amount of capital. And I also agree that if the price falls substantially you may not get much for the covered call at the strike you sold, but there are quite a few ways to repair a position like that. A trader doesn’t have to wait until the price goes back up. They can deploy any number of techniques to generate nice cash to help repair the position without having to wait.
Here is a whole playlist about ways to repair positions that go bad: ruclips.net/p/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9
Outstanding video Randy! Thank you for what you do to educate others.
Thank you Jeffrey 😊
What is your strategy when the market drops and selling a covered call is no longer an option? If the market sells off enough the premium for selling a covered call drops to almost nothing.
When the markets drops we tend to be a bit more conservative with our CSPs and more aggressive in rolling them down if they go against us. When assigned a CSP I tend to be more aggressive with my CC strike placement and more aggressive with my repair strategies. I’m also a lot more open to bearish call credit spreads and or naked calls.
@@StockandOptionMyLifeOfLearning spreads and naked options lead to permanent losses, not just paper losses. that's essentially gambling. i dunno. doesn't sound safe
@@dumbcat buying shares straight up can lead to permanent losses as well, it's about mitigating your risk and understanding when to implement a strategy
I wouldn’t sell naked calls on highly volatile stocks, and even the stocks I trade in, which tend to be older or mature companies, I usually trade bearish call credit spreads instead of naked calls.
what if SPY tanks to 300 or lower? when you get stuck bag holding what do you do? would you just sell low premium at your breakeven strike price?
That is one way you can handle it. However, there are ways to repair option positions that have gone against you. Here’s a playlist dedicated to that: ruclips.net/p/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9
I was wondering what this was going to look like when it came out. Interesting thought exercise. For 80K income I think I would want at least 400K in capital. And looking at the numbers yesterday, and the current market volatility, I would be inclined to sell options at varying strikes, not put all my money in at a single level. I also think I would be inclined to only sell enough to cover my income needs and leave some cash behind for those drops others mentioned in other comments. Based on the comments here, I hope this is an indication we are near a bottom. 2 years ago people would be telling you this is crazy, only generating about 80K off 250K? Why so conservative? Stonks only go up! 🚀🚀🚀
Your videos and breakfast are becoming my Saturday morning routine. Thanks as always.
You’re awesome Mike! Thank you for sharing. I like that strategy. 👏
Me too! My Saturday options breakfast.
Thank you for your support! 😊
Mike, I too would want to spread my trades out over time and at different strike prices. A lot of planning needs to be done before the real trading happens.
@Mike Surel - Agree. I like the idea of laddering my DTEs and keep rolling them and either csp or buying more shares when they get assigned. Been toying with how to be flexible and able lower my cost basis when the SPY drops 30/50/80 points. How to best manage with having to sit out during a downturn.
Excellent video …i am doing something similar in my PM account and ironically I do prefer going out further in time and locking it in. You can also do a buy write strategy and go out 3 to 6 months or even up to a year and lock in the income you need to live on for the upcoming year.. great job as always.
Thank you for sharing Richard! I can see at some point if I want to stop trading as much, I’d definitely be open to selling farther dated options like you mentioned. Thank you for your support!
That’s a good point especially now with this down year selling puts a year out is probably a great idea now. more then likely after a big down year on the S&P a massive climb will start again and many people will miss out and your idea I like and use buy only like 2 months out at most but I do it when the market is horrible to look at daily as us option sellers do. And there will probably be a time way before it expires to buy it back with a huge % of the premium collected , why not buy it back and reinvest again and repeat. I know do it quiet often right?
Friday, sold 50 put contracts (5000 shares) MO Jan 20 '23 for $1.75 for $8750 for a 17% annualized C-on-C return.. If I wind up owning it, my new yield on cost will be 8.7% PLUS any new covered call premium I may write.. Using another 90 days, the new "at the money" premium should be around $1.50 to $2
That's awesome Mark! Thank you for sharing.
At what strike?
@@skydouglas996 $45 strike. Sorry, left that out
👍
I love this guys cause he sounds like Mitch hedburg . Great content as well 🔥
Watch out for the red banana… 😉
I like this, but if you're living off of the income (premiums), won't you be able to do less contracts over time as the SPY price increases? So, it seems like, as time passes and SPY increases you'd make less because you'd be doing fewer contracts?
If you don't grow your account, then, yes, if the price of the underlying went up, you wouldn't be able to do as many contracts. However, you should get paid more for the contracts you're doing. For example, a $100 strike price cash secure put option will pay a lot more than say a $50 strike CSP.
In a downturn market, this wheel strategy needs some buy put protection just in case we go through big downturn. So although you sacrifice some of the premium collected, one can be at ease
IMHO
That’s a great point! Here’s a video on that exact subject: ruclips.net/video/910pc4WbGRs/видео.html
CPS - Credit put spread.
Great job Randy! You know I’m a huge fan of The Wheel Selling Premium!! If you ever travel to Atlanta or nearby I’d love to meet you. You’re the best!!
Thank you, Michael for your support! 😊
Hi randy how is your exit setup? Like when do you take profit and cut loss, in terms of percentage thanks
When an option has less than 15% of its extrinsic value, we look to exit or roll it. If a position has goes against us, once most of the extrinsic value is gone, and especially if it looks like it might head lower, then we look to do something with the position by rolling it out or rolling it down and out if it’s a cash secured put. If it’s a covered call, then we will look to roll it out, or possibly even roll it down and out as well.
I don’t tend to exit a position just because it’s going against us unless something has changed fundamentally with the company. Here is the link to a video series talking through some of the ways that we repair positions that have gone against us: ruclips.net/p/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9
You have demonstrated selling options at 37 delta and 22 delta . Which one of these is better, or is there an optimum delta options to sell?
If you’re using delta to enter positions, it will depend on your desired level of risk. However we generally do not position our strikes based on Delta. We position them based on support and resistance.
2:14, Please correct me if I'm wrong. In order for us to sell the put option and collect $6,454, we need to sell 700 option contracts, that means we need to have $24,500,000 in our account.
Otherwise, we can't sell 700×$9.22 and get $6,454.
In this video, we are using the example of selling 700 shares worth. Since 1 option contract is equivalent to 100 shares, that would be 7 contracts. It would not be 700 option contracts rather 7 contracts for 700 shares worth. 700 option contracts would correspond to 70,000 shares worth.
@@StockandOptionMyLifeOfLearning That's not the point. you're displaying 「700shares × $9.22 = $6,454」, to do this, we need $24,500,000, don't we?
If we sell just 7contracts, its only gonna be $64.54, and even in this case, we need $245,000 in our account.
If you sell 7 contracts or 700 shares worth in this example you’d pocket $6,454 and would need $245,000 if all 7 contracts or 700 shares were assigned to you.
$350 strike x 700 shares = $245,000.
7 contracts or 700 shares worth x option premium per share of $9.22 = $6,454 pocketed in this initial trade.
@@StockandOptionMyLifeOfLearning wow
Would you recommend playing SPY with a $10,000 account, using credit spreads or Iron Condors at 30 Delta strike prices? Do you think that would be fairly safe?
I am not a huge fan of iron condors. The reason is that I generally have an opinion of what direction I believe the markets are trading in. However, if you believe that a stock or more specifically, SPY is going to trade sideways, iron condors could be a good way to trade.
When it comes to trading short term options, I don’t look at Delta very much. I’m more focused on support and resistance.
If you’re newer to option trading, even though you have $10,000 to trade with, I would suggest risking a very small amount of that $10,000. You want to have as many chances as possible to be wrong and still be able to keep playing the game. If you or anyone reading this comment is new to option trading, I would encourage you to watch these videos: ruclips.net/video/pmiphVNQong/видео.html and ruclips.net/video/YWVbALl08mw/видео.html
That’s great for those with a large account, I think WHEEL and covered calls and LEAP is the way to go; what about for those just starting out w a small portfolio of 10k usd, o think credit spreads, naked, iron condors, strangles and debit spreads is the only way to go yeah?
Here's a video playlist for how to trade options with a smaller account: ruclips.net/p/PL3j38I2YtGw0FFabxE0_FhmRYZiSDF6Gj
My Saturday is now complete, thanks Randy!
You’re awesome Jake! 😊 Thank you for your support.
How safe is this strategy? What is the percentage return yearly?
If you know what you’re doing and don’t use much or any margin or leverage, in my opinion, it’s a really good strategy. However, if a trader trieds to use a lot of margin or leverage and doesn’t know what they’re doing, it can wipe them out.
This is brilliant. What if you did these contracts you played it weekly? It would make double or triple the money coming in? What is your advice on that strategy, instead of monthly, do it weekly?
Thank you. Here is a video on that exact question: ruclips.net/video/1Bl69YJ04cM/видео.html
@@StockandOptionMyLifeOfLearning I watched that video and it made sense why monthly is better. What is your opinion on selling a strangle on SPY @ a 30 delta on each side? It would create more income. Both sides could expire OTM or you would have to manage one side and possibly roll out and down or up. Curious your thoughts on that.
I don’t do a lot of strangles because I typically have a market direction I’m leaning towards. I also don’t look at delta much except when I’m trading LEAPS, I’m more concerned with support and resistance.
That being said, I know some traders like strangles and trade a lot of them. If a stock were in a sideways pattern I’d definitely be open to strangles.
Can be done with QQQ too i think. better premiums. thanks for the great vid!
Absolutely! Thank you for your support. 😊
Hi randy, I want to know. Usually what are you exit strategy after you enter a trade, in terms of profit target and loss target? Example, 50% of premium is your profit target and 150% of premium received is your loss target
The reason I asked this was because I’ve read somewhere that usually ppl take profit at 50% of premium and stop loss to exit trade is 1.5x of credit. However isn’t the risk to reward ratio not balanced, especially when you lose more than what you collected. Thanks and keep up your great content
It is common to use percentages to close out positions and try to match up potential returns with potential loss. However, with the companies we trade in and when we tend to enter positions, I haven’t found that to be tremendously beneficial. So I don’t limit myself by closing them out at 50% profit if it looks likely that the position will continue moving in our favor. I think that might work for some people but for the way we trade, I haven’t really seen that it would be long-term beneficial to us.
If everything plays out according to plan, I look to close positions out once they only have 10-15% of time value left in them. If they don’t go according to plan, then it’s case by case and if the underlying has earnings coming up or not.
@@StockandOptionMyLifeOfLearning also do you tend to use up your entire portfolio to sell options? Example, your 1 mil usd account, do you use up all 1 mil to sell options or maybe only use 50% of your account and the rest leave it in cash
@@StockandOptionMyLifeOfLearning okay, then what’s your way of managing your risk / stop losses for each trade you enter. (Eg. Max loss is 3% NLV per trade) Would like to know how you deal with if it goes to a bad trade?
I think this video just removed a mountain of stress off my back!
What would be the downside of going this with a volatile type stocks such as Tesla where premiums are higher?
I am in Tesla and made the mistake of selling 900 shares well OTM .. that's over close to $ 300k at the time of selling.. yeah I got a good premium but now I'm stuck bag holding... I keep rolling over my positions until tesla can recover.. lucky, I don't Retire yet but it's best to bet wayyyy OTM with volatile stocks.. premium is still good and you get out of the market sooner as well
The thing I don’t like about volatile stocks is that usually they’re volatile for a reason. They are usually unproven, low or non profitable companies. I don’t mind potentially doing short positions in them, but I usually don’t like to do bullish positions.
I just ran some numbers and it looks like with the volatility where it is right now you're getting about half of that
Option premium is higher when volatility is higher and lower when it’s lower since it’s one of the factors that influence the price of options.
Do you use Lrcx or tesla for wheel strategy? Also im assuming you don't care about holding shares the main objective is to make the premium and get all the cash back ?
At this time, we’re not running the wheel on those two companies. However I’m not 100% opposed to trading options against them in certain scenarios.
In our main option trading account, we are mainly focused on generating as much cash flow as possible. However I have a separate account in which we buy stocks and own them for the long term. At this time, we are not selling options against that outright stock ownership account. We mainly want it to appreciate in value and for the dividends to grow.
Here’s a video series I made on that account: ruclips.net/p/PL3j38I2YtGw3-1mBr4hEoDiGW-qi0NDAp
Thanks for the vid. I use the wheel but find that often the underlying falls below the strike price of the initial csp. In this case, and after assignment, one may be waiting for some time to collect meaningful premium form a future cc.
So, a further lot of csps can be written if funds permit or a sometimes a long period of waiting must be endured. Hence no regular income generated if funds are tied up and calls cant be meaningfully written.
Regards from Australia.
Thank you for sharing. I have found that selling options around support and resistance tends to help. Also, if a trader is willing to sell farther out of the money CSPs then they will be less likely to be challenged however the initial return will be less.
There are some ways to repair positions that have gone against traders. I discuss some of the techniques we use in this video series: ruclips.net/p/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9
This idea fits with what I would like to do in retirement, thanks for putting this out. However in my cruising around videos and blogs researching, I found some would say SPX would be better as it is cash settled and has better tax treatment. I would like your opinion on this. How would you compare wheeling SPX to SPY? And do you think it's a better way to go, if not, why not?
If you have enough capital, I definitely agree with you that is more advantageous to do it with SPX as compared to SPY. It’s just quite a bit more capital intensive since SPX is approximately 10 x SPY. But if you have that capital, I would definitely prefer SPX over SPY partly because of the tax advantages in the US as well as the European style option. So you don’t have to worry about early assignment.
Another option is using XSP which is also cash settled like SPX however it is the same size as SPY.
@@rickcossey6211 Thanks, I was not aware of XSP, I'll check it out.
You can't do the wheel strategy on index funds as they are cash settled. This means you don't own anything at assignment. I'm confused why a guy making videos on the wheel strategy is telling you it would be better. You literally cannot perform it on SPX.
I would posit that the answer to your confusion is in your own comment. Think of it this way. Wheeling is NOT the goal. Wheeling is the result when the crap hits the fan. With SPX, the danger of being assigned period, especially early, has been removed. The cherry on top is the 1256 tax treatment.
I have been told that the only time SPY options are allowed to be considered 1256 for tax purposes is if you are a “trader” per the IRS and have made a 475(f) election.
So you need 250k to sell the otions and another 250k in case you get assinged right?
It depends. If you're selling $250,000 worth of options, then that's all you need. However, if you're selling $500,000 worth of options, then, if you're approved for margin, your margin requirement might be a lot less but if they were assigned to you, then you would need the entire amount to cover the position if you didn't want to use margin.
Hi, in which Patreon Membership Level can I follow the Spy-Wheel trades live?
Although I’m willing to trade in SPY, I don’t have an ongoing SPY position in it. The returns are quite a bit better and we can pick better entry spots by trading in individual stocks like we do. However, if I get enough request, I’d consider doing an ongoing SPY position.
Thank you for the video. You’re one of my favorite RUclips Channels. What are your thoughts wheeling UPRO if you don’t have $250k? Thx
Thank you for your support! I haven’t traded in UPRO however we have been doing an experimental position in TQQQ. I don’t feel confident enough to say that I have found a winning formula yet. However our strategy does involve buying twice as many protective LEAPS put options as put options or covered calls we are in. If you trade in it, I think you have to plan for it to go to zero or really close to it during a market crash and that’s why we bought twice as many protective put options.
I like having a long Leap put when I’m doing CCs. Having double protection for a 3x etf makes sense. Thx!
better background now Randy :)
Thank you Sarkis 😊
Is that mean I have to have 250.000 now? Can you do a video for small acc? Thanks.
Here is a video series dedicated to trading with a small account: ruclips.net/p/PL3j38I2YtGw0FFabxE0_FhmRYZiSDF6Gj
do you do credit spreads?
Yes we do in certain situations. Here’s a video on credit spreads: ruclips.net/p/PL3j38I2YtGw272tus6umU_zxFdwnJ8E0c
Thank you for the video. I wonder why they say a retiree needs $80K yearly. Most retiree's like myself have their homes paid for so $0 mortgage to pay. $40K to $50K seems reasonable unless one lives in a high cost of living state. This seems doable and a way to supplement ones SS benefits and IRA's.
Hey James, I agree, it does depend on where you live, and what bills you have. It sounds like you've done an awesome job getting things lined up for you! 👏 That's great to hear!
I have been waiting for you to do a video like this one for a very long time. I’ve seen other people post similar videos, and was not impressed. My plan is to use this strategy to supplement my meager monthly pension when I retire. This video gives me hope that I will be able to retire comfortably. Thanks for this and all of your other videos, Randy.
Thank you for sharing and for your support! 😊 It really means a lot to me.
A little pension a little social security and either a little dividends or Randy’s idea and I bet you’ll have a nice comfortable retirement and won’t have so many taxes as we do from our pay checks every week. And no commute bill either looks like you have a very bright future that’s awesome congrats
Thanks
Why do these videos always use an assignment on the CSP at the strike price? What about when it blows through it and it's to low to sell a call...
The only price you can be assigned at is the CSP strike price. If the stock blows through the CSP strike the challenge then becomes where to sell the CC. We have a whole series of videos on how to repair that situation found here: ruclips.net/p/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9
That’s why you only use stocks that you wouldn’t mind owning. If you sell weekly’s like I do there’s really not much of a chance a highly rated stock is goin to bottom out in a weeks time. Yes it could happen, but if you stay with deltas under 20% the risk is very minimal
How to earn the first $250,000/- additional amount ??
That’s a great one! I’ll tackle that in a future video.
Has the strategy has changed? Options on individual stocks are no longer sold. Now options are sold on SPY.
I definitely prefer selling options in individual stocks because the return is better and we can pick better entries. However if a trader wanted a simpler way to do the wheel and was willing to accept a lower return, ETFs might be the way to go.
Here is a playlist that shows our monthly cash flow of the past 2+ years: ruclips.net/p/PL3j38I2YtGw0W9xSkNpaOw73OmuEA5xf9
can live on 1000 a month in some countries
Hi Randy. What consideration is there for diversity? I understand there is inherent diversity in the SPY, but what if it gets put to you, then drops 10-20 percent over a month or two, and you can't get a decent call premium? One argument might be that, if SPY was doing poorly, then it wouldn't matter if you were diversified with multiple individual stocks, because everything would be doing poorly. However, there might be a few that would really shine and offer good premiums. I read your responses regarding repairing bad trades, and I guess that mostly answers the question but, I guess my ultimate question is, do you consider an "all in" investment in SPY to be equally diversified as owning individual stocks?
I think it is as diversified as owning stocks. However, personally I don’t think it’s as good or better than trading in individual stocks. I prefer to not use ETFs. The reason is that I can pick when I enter each position. With SPY, especially, if you’re trading ongoingly, you’re trading basically one big stock no matter whether it’s up or down. However, in our main option trading count, we have about 40 positions. So we are diversified and get to handpick when we enter each one of those positions, which I like better.
Also, the return should be better than if we just traded SPY. However, it does require more work.
Great video brother as always....now I just need the 250000 and I'm all set. I could live like a king in Thailand on that money.🍷🤙
That would go along way! I am rooting for you! 👏
Firstly this is not a SAFE strategy and also you need only about 6k per sale to sell naked PUTS so for 7 puts you need less than 50K to easily lose your money :)
Please see the video I made on the use of margin: ruclips.net/video/XU9LF5KmtJ8/видео.html
By the way, I *never* promote the use of margin, especially for a newer or inexperienced trader.
I thought you have to own the underlying instrument to sell options?
To sell covered calls, you do need to own 100 shares for every contract.
To sell cash secured puts, you need to have enough cash to pay for 100 shares for every contract, in case you get assigned.
Who knows, but we may be nearing a bottom Randy. Look at the generally negative, worst case comments. It's easy to be critical of a stretegy and find fault when looking back, but I didn't hear a better strategy from anyone to generate cash flow on stocks they own/would like to own. And, when the market turns around and you're not in, good luck. You've probably seen the studies that show the small number of good days in the market drives overall, longer term performance. 💪💪💪
Seems like people are coming at you more than usual on this one. Didn't realize so many folks had a crystal ball. ⚪
It’s interesting the people who haven’t considered the other possibilities like holding cash and inflation eating away at the value of it or if they owned stocks out right and had not sold options, they’d be quite a bit worse off.
But it’s interesting to see what people say, especially the ones that make well thought and informed observations. I always appreciate those and laugh at the ones that haven’t thought through what they’re saying. 🤓
@@StockandOptionMyLifeOfLearning and experts say to draw down 4 percent when you could be making 10-20 percent annually selling options.
hypethetically, in a perfect world and on paper
You can backtest and or paper trade a strategy to see how you'd most likely trade it in real life.
if somebody finds risky or stressful to sell puts on spy please move to working all your life in your “secure job”, the guy actually have a legit almost non directional strategy with an edge that is not gambling that the real traders use, while you “dont risk”
buying long options
Not clear to me. OK, you collect $6545 if the put expires worthless. If the put is in the money and you get exercised at 350 what happens to the $6545? Your risk is that you have to buy the stock at whatever price SPY is below 350 and have the shares to surrender to the put buyer.
No matter what, you get to keep the option premium you received upfront when you sell an option.
Here is a video that teaches all the basics of option trading if you’d like to check it out: ruclips.net/video/bKLxEY3BolY/видео.htmlsi=BUvDEvJL-KC1Vptd
It's not a bad strategy when the premiums are high but in a low vix environment, I think if you have that much cash then you can easily make more deploying iron condors or even good old vertical spreads. Heck, there are people on RUclips who make a living selling SPX 0dte options with extremely low deltas. Obviously that needs a good stop loss, which is not very hard. If a person can throw 20K easily on one trade, they can make much more than the wheel. But obviously the vix can go up anytime. In that case the investor needs to change the strategy. I think agility is the key here.
Thank you for sharing your thoughts. There are definitely strategies in which you could use leverage to make more income. You just have to be prepared for when the market goes against you and understand how much you're going to lose of all the previous months profits when that happens.
I have traded leveraged and margined up strategies. I found the one I currently use is the best long-term strategy I've ever traded. We don't stick to just the wheel strategy, we use other techniques, but the wheel is the foundation of a good portion of our strategy. I called it the upgraded option wheel strategy.
You would be an absolute fool to sell 57 contracts on SPY at once.
If you didn’t have the capital to handle it, it would eventually be a really bad thing.
The wheel strategy is fun, but to present this as an approach to retirement, and risking the whole capital is insanity. If SPY drops hard, which it did in the last few weeks, you are stuck with the stock and no way to generate cashflow until it comes back up. To think this is realistic to do with 100% of your capital is misleading and dangerous..
Thank you for sharing your thoughts. I disagree with you. I’ve been doing it for a long time. In fact, I’ve done it not only with stock and option trading but with several other assets in which I risked real and most or all my money. It’s how you manage that risk that determines success or failure and if you do it with knowledge and discipline or not.
@KrahsThe
"The wheel strategy is fun, but to present this as an approach to retirement, and risking the whole capital is insanity."
What strategy during a bear market are you using, that earns decent income, preserves your capital, and you don't consider it insanity?
IF YOU ARE WILLING TO READ THROUGH THE WHOLE POST, YOU WILL LEARN A NEAR FULLPROOF METHOD THAT FEW ARE TEACHING.
During 2021 I increased my portfolio by 45% using the Wheel Strategy in a modified way.
I would sell weekly, SLIGHTLY out of the money puts, (FOR HUGE PREMIUMS), and let them expire in the money only if they were in the money by less than 2%.
If the put was in the money by MORE than 2% on the Thursday before expiration, I would roll the strike down one strike price, and far enough out to an expiration that earns a net credit.
Anytime the put was more than 2% in the money on the Thursday before expiration, I would continue to roll down one strike price and far enough out to an expiration that earns a net credit. Rinse and repeat until the strike of the put is brought down to an at the money strike.
This method prevents getting assigned to a falling knife, and you get PAID to wait until the stock finds the bottom.
Once I owned the stock, I would sell weekly, SLIGHTLY out of the money covered calls. This earns HUGE PREMIUMS.
During a bull market, if the strike becomes in the money, on the Thursday before expiration, I roll the strike up one strike at a time, and far enough out to an expiration that earns a net credit. Even as the strike continues to be in the money, I have rarely been exercised early.
Rinse and repeat rolling up one strike at a time, and far enough out to an expiration that earns a net credit, anytime the strike is in the money, the day before expiration. If the strike is slightly out of the money, I roll with the same strike, and out to the next expiration for a nice net credit.
If the covered call strike is DEEP out of the money, I roll the strike all the way down to the at the money strike, to earn HUGE premiums.
I do not have a problem selling covered calls with the strike BELOW my cost basis.
During the bear market I follow the share price with my strike to keep it at the money, for HUGE premiums.
Anytime the stock price goes up, above the strike, I go back to rolling up one strike and out far enough to earn a net credit. Rinse and repeat rolling up one and out, to earn net credits, until the strike becomes out of the money again. Then I go back to selling at the money strikes.
I have sold thousands of covered calls and cash secured puts, with MANY of them becoming in the money the day before expiration, and I have successfully rolled them for net credits, and avoided assignment. I have NEVER had a net loss. I have always continued rolling until the last option in an extended rolling campaign expires out of the money.
Out of the thousands of options I have sold, only 3 have exercised early. You just need to monitor the EXTRINSIC value of the premiums when the option goes deep in the money.
My rule of thumb, is when the EXTRINSIC value of the premium is $0.10 or less, I roll for a net credit.
Buyers are motivated by profit. Buyers lose the extrinsic value of the premium when they exercise early. They make MORE money by selling their option, than exercising the option, and losing the EXTRINSIC value of the premium.
There is an exception. If a dividend stock has an ex-div date on the Thursday before expiration day, and the Covered call is in the money, or even slightly out of the money, the buyer could still profit from exercising on Wednesday to qualify for the dividend. I sold a covered call on a dividend stock that was exercised on Wednesday, the day before the ex-div date.
I thought I was safe because the strike price was $0.25 out of the money. I was wrong, because the dividend he received was $0.75 and he made a net profit of $0.50 per share.
I had 10 contracts. Ouch. If I had known then, what I know now, I would have rolled my covered calls on Wednesday, out to the following expiration day, and saved my dividends.
"The wheel strategy is fun, but to present this as an approach to retirement, and risking the whole capital is insanity."
Quite the opposite. Knowing HOW to roll your in the money options is the safest and surest way to earn HUGE income during a bear market, neutral market, or bull market, AND preserve your capital.
Sure, a deep in the money put will create a drawdown of your account value, the same way that owning stocks that fall in price create the same drawdown. The difference is that you can recover from that drawdown FASTER, by continuing to roll the put strike down as the share price falls, then when the put strike becomes at the money, you can buy the shares, at the bottom, BEFORE the stock begins to recover.
And by keeping the shares you own, collect the dividends, AND collect a huge premium from selling the first covered call strike, at the money, AND rolling the covered call up one strike at a time, and out to a farther expiration for a net credit, whenever the strike becomes in the money, you will also avoid assignment, preserve your capital, and get PAID to do it.
"We can't change the direction of the wind, but we CAN adjust our sails."
Knowledge IS power, ONLY if you apply that knowledge.
Trading the Wheel myself, the issue in my view is not that it absolutely can be a great source of income. But to position it as a solid retirement plan and as the only source of cash is questionable. You will require to stomach hefty draw-downs, depends on a neutral-bullish market and requires discipline in cash/margin management.
@@tomstock9546 The drawdown from selling cash secured puts, is not any worse, than already owning the stocks, and the drawdown they experience, in a bear market.
Example: You buy a stock at $100 per share, at the same time I sell an at the money CSP with a $100 strike price, and I earn a $2 premium. Your cost basis is $100, and if I get assigned, my cost basis will be $98 per share.
I'm already ahead, at the start.
If you stock price falls to $80, you have a drawdown of 20%.
My put is deep in the money, and my account shows the same 20% drawdown as your account does.
BUT, I AM STILL AHEAD $2 PER SHARE FROM EARNING THE $2 PER SHARE PREMIUM.
I can also roll the strike price out to a farther expiration to avoid assignment.
You don't have that advantage with owning the shares.
Think it over.
if the stock dumps and you’re playing wheel strategy you should be selling covered calls on the way down and banking. Ideally keeping half of your capital for when it’s time to sell cash secure puts at the bottom. When it bottoms you sell your covered calls above your cost basis with a expiration that is farther out and if it does ever hit you’ll be selling for a profit and not a loss while still collecting premium on the puts. Very low risk.
Thnx for the insight , strategy is flawed , wt if spy drops down 100$ or more? Rolling over might not work if the price moves suddenly and strongly
I was trying to keep this video as short and simple as possible. You would have to decide which is more important, generating as much cash flow as possible or continuing to sell options at the strike price that you bought the stock at. However, here's a playlist on how to repair positions when they've gone against you: ruclips.net/p/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9
@@StockandOptionMyLifeOfLearning a more safe approach is to buy in tranches … u sell puts (and calls if assigned) but u gotta be ready to add more if price slips.. for example u invest 300 k and use 100 k every time price drops … u gotta be smart with ur interval though
if the Put is assigned, and the market does not move favorably, seeking calls may not work, significant losses may accrue, and the the person making that trade does not have a job.
Look at the view and comment count. Outperformer! Looks like you hit on a potent mix: retirement and options.
Lots you could do with that. Maybe that's a theme for awhile, if you don't mind all of the ridiculous comments. 🤑🤑🤑
😊 yes it does looks like a topic of interest. I already have a couple other ideas to build off of it.
@@StockandOptionMyLifeOfLearning Awesome! Appreciate the positive attitude.
you got any proof your doing this with a live account...
Here is a playlist dedicated to my option trading cash flow over the past several years: ruclips.net/p/PL3j38I2YtGw0W9xSkNpaOw73OmuEA5xf9&si=HEvDMhkrgsRRU5L9
I’m working on a video right now that will show the cash flow generated the last couple months of 2023.
I also post my main option trading account statements on my Patreon for everyone to see, patrons and non-patrons.
Not sure how well the wheel would work in a year like 2022, where they market declines so much. You are forced into selling calls under your cost basis, or high enough that you collect very little premium. I believe this strategy has been back tested and falls apart over longer periods.
@@rollie5579 but then you're not doing the wheel.
@@rollie5579 Wait a min. The point of the wheel is to take the shares and then sell calls. LOL Otherwise you are just doing a regular put strategy.
We call it our upgraded version of the wheel strategy. We don’t blindly follow the wheel strategy. Sometimes, it’s better to adjust your positions than just blindly close your eyes and hit a button.
Here’s a video you might find interesting about this exact subject: ruclips.net/video/UC6WSikYzqE/видео.html
When you compare the strategy to outright stock ownership, it definitely beats it in bear markets, usually sideways markets, and can even potentially beat it in a bull market depending on how strong the bull market is. But the wheel strategy just a piece of how we trade. We don’t limit ourselves to just that strategy although it is the foundation for a big part our overall trading strategy.
Unless SPY tanks and you are stuck with shares for a long time with no income...
If SPY tanks, and you’re only willing to sell at the price you bought it at, your income will definitely go down. However, there are quite a few techniques you can use to repair positions that have gone against you. Here’s a whole playlist dedicated to that: ruclips.net/p/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9
wheel is fantisitc to pay taxes along the way
You missed part of the income picture.
If SPY climbs past the point to which you have to sell puts at a strike higher than 357.65 to make your income goal your ability to purchase 700+ shares is now reduced to 699 which means you can only do 6 contracts which then reduces your income by over 14%. That then pushes you to higher deltas and lower capital appreciation and eventually....a bad investment.
Your only hope at that point is a bear market so you can deal with more contracts or that you didn't need the full $6,600 per month and reinvested everything in excess of your spending plus the hope that you reinvest enough and at a high enough rate to maintain at least 7 contracts.
Your video what just the rosey positive side with the strategy not moving against you, which would be a market that rises away from your ability to harvest what you need while reducing the number of contracts you can use.
There are definitely strengths and weaknesses to every trading strategy and technique. A trader has to determine which one(s) best fit their risk tolerance and goals. Here are several other videos about trading the wheel strategy that show all sides of it, good and bad: ruclips.net/p/PL3j38I2YtGw2DJsqiZnE4hx2jzsizcyRy
A COVID-style drop (without the instant FED-fueled rebound) would leave you with many months of not being able to sell calls above your break even, though. 250K is not enough of a buffer to survive a bear market. Everything has to go according to plan all the time with such a small portfolio. I wouldn't recommend it.
There are ways to protect your portfolio: ruclips.net/video/910pc4WbGRs/видео.html And ways to repair positions when they go against you: ruclips.net/p/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9
This assumes that you will win on every option trade !!!
Some allowance for things not turning out as planned is important.
You should rename video, or add disclaimer.
Hey Joshua, thank you for the suggestion. It's in the description but I'll also post it here:
Disclaimer: I am not a financial planner and am not offering investment advice. This is an opinion channel only and should not be taken as any form of financial advice. The ideas and strategies that I discuss should never be used without first assessing your own personal/financial situation, or without consulting a financial and/or tax professional. There are financial risks involved in taking on any monetary transaction that I discuss in my videos. I may receive a small commission from the purchase of any item from using the links listed above.
@@joshuawoodford7525 You are a male Karen 😂
@@TheMattj88 That's actually hilarious 😂👍
I believe its 33 daysx12 months not 33x365 days
I did the math based on how many days that option had to expiration. Since there's 30.4 days per month, and the option we were using as example was 33, we had to divide it by the number of days until expiration x the number of days in an actual year.
#16 on that list of SPY holding is a real winner. Just ask crybaby Jim Cramer.
It has been beaten way down lately!
Very risky to commit 100% to a single strategy, let alone a single trade.
I agree. I think you should spread money around.
this video is misleading by ignoring huge risk of option trading. if somebody use this strategy at the beginning of this year, he would be in huge loss and would only get some pennies if he doesn't sell calls at strike much lower than his SPY entry price.
Maybe you missed the part where I mentioned you could sell cash secured put options at a lower strike price to decrease risk. 🤷🏽♂️ If somebody owned stocks at the beginning of this year, they would most likely be down more than if they did this strategy. The only way they might potentially be better is if they shorted the market, which is unlikely, or if they were in cash, then inflation has eaten away at a chunk of that value and when the market turns, they’re going to miss out on potentially an opportunity that won’t come around for another 3 to 5 years.
@@StockandOptionMyLifeOfLearning instead of playing with SPY wheel, what is your opinion about SPX covered call ETF like XYLD, which gives 12% dividend and ETF price is almost flat in last 5 years. 12% yearly gain sounds good, it would double the account in 6-7 years.
@@lizhongshen xyld is junk. if you did the wheel all year on spy you would still be way ahead of your 401k
I only have 2 weeks of data. Been doing the same three times per week on an Xl sheet. 1 month premium is quite a bit lower.🤔
@@lizhongshen XYLD, RYLD, QYLD all have poor premiums. Earning large premiums are more important than dividends.
If you like the safety of ETF's, go with one of the sector ETF's, like XLE, or XLU.
OR, if you have the stomach for volatility, AND you know how to roll properly, for net credits, try selling cash secured puts, and then covered calls on the 3x leveraged ETF's, SOXL, TNA, TQQQ and UPRO.
They cover the major markets, and have insanely high premiums.
I don't use UDOW because they don't support weekly options.
Weekly options are the only way to go, IMHO.
False. It’s not enough capital
Well, I guess that depends on how much income you need to generate.
one little crash and you are stuck
There are ways to repair option position that have gone against you. Here’s a whole playlist dedicated to that: ruclips.net/p/PL3j38I2YtGw2mMZNftBUDs1Ln984R0wV9
this aint gonna work , market is smart . you might be able to get that first premium the first time you sell puts , but when you get assigned and its time to sell covered call , trust me you wont get that ideal premium you want anymore.
Sometimes the market is too "smart" and pushes it stocks into way overvalue territory... and sometimes the market is too "smart" and pushes stocks below what most professional knowledgeable traders would consider a good price. I guess it depends on what I traders definition of "smart" is.
However, you are correct in that, generally, you'll get a bigger premium on the first option you sell. Then if the market is not located close to the strike price that you're selling in subsequent rolls, it could/would be lower. That's one reason why we trade a lot more in individual stocks, because we are able to take advantage of a lot more different opportunities than just SPY.
Here's a playlist that shows a track record of this strategy: ruclips.net/p/PL3j38I2YtGw0W9xSkNpaOw73OmuEA5xf9
What are your thoughts on doing this with QQQ or IWM? Thx
Absolutely. Just please make sure you understand what might happen to those 2 ETFs in a worst case scenario. They tend to be a bit more volatile than SPY.