Why you should STOP using the wheel strategy
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- Опубликовано: 4 окт 2024
- The BIGGEST Mistake You're Making when Selling Options (Video)
• The BIGGEST Mistake Yo...
Cboe Covered Calls vs. Cash Secured Puts Comparison
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Cash covered puts don’t necessarily benefit if the stock goes down, if it goes up and the put you sold expires worthless then you just collect the premium and can sell another put at a higher strike, and keep going until you get assigned, and if you like the stock longterm you’d be happy to take assignment anyways
Agreed but you will have to have a lot more money for the collateral of the put as the stock goes up
@@safemoonboy402that’s is true but with the consistency of the premium and your adding money to your account that shouldn’t be a problem
I like the idea of selling puts and sellign calls both at the same time. The strangle seems to fit my style very well.
CSP is also good if the stock goes up since you collect the full premium, if the stock goes down below the strike you're assigned to buy 100 shares at your contract stike. Also, CC requirement is to own 100 shares of stock. So if the stock goes over the strike your 100 shares are assigned to sell at the contract strike. So it's fine if the contracts aren't assigned you still collect premium.
You should use a cash secured put to start the wheel and then when you get assigned use a call credit spread so if the stock rises above your strike you can take advantage of the price appreciation with the long call that you purchased on the spread.
selling puts allows you to obtain the stock on a dip. I disagree with you entirely.
Except when you keep getting assigned your CC’s and constantly have to pay capital gains tax.
In addition, short puts are also bullish so they do take advantage of the stock increasing. They do not perform better when the stock decreases like you say. Both covered calls and cash secured puts are bullish to somewhat bullish positions.
This is a bad take on the wheel. Best use of the wheel is income generation in a tax protected account.
If you run just CC’s you’ll end up having to pay more for 100 shares to get back in and run covered calls since the stock price has gone above your strike and you must sell at a lower price and buy back in at a higher one.
You're right that both Covered Calls and Cash Secured Puts are neutral to bullish trades, but my point is just that CCs are MORE bullish. And to be completely clear, I think that CSPs (and the wheel) are a good strategy, I'm just saying that they're not as good as CCs alone.
With both trades, you collect approximately the same premium. The difference is that with covered calls, you get the "bonus" of the capital gains if the stock rises, whereas with CSPs, you get the "bonus" of buying the stock at a discount if it falls. Hence why I say that CCs perform better when the stock rises, and CSPs perform (comparatively) better when the stock falls. That's not my opinion, that's just the math of it.
Of course, neither trade is great in a declining market - that's not what I'm saying. I'm just comparing the two trades to each other. My point is that since they're both bullish trades, and CCs are comparatively MORE bullish, you might as well just use those if you're bullish on the stock.
There's also some data from CBOE to support this: imgur.com/a/Uimst9n. Comparing the call-selling indices to put-selling indices, the 30-delta call-selling index (BXMD) has historically far outperformed all of the put-selling indices.
@@MoreMoneyLessProblems I get your point, but.
It really depends what your goal is, my goal is to generate income with less cash, so in a CSP I have to set aside the amount of the collateral and my hopes are to win the trade and not be assigned hence I would benefit of the market rising. I also have an insurance policy that if I do lose the trade I still get the benefit of buying the stock at a discount and I turn around to sell a CC and again generate income, but this time I don’t mind getting assigned because I want to free up my capital so I could do the same thing over and over. That’s the meaning of the wheel strategy.
So from my perspective, doing the wheel strategy you always benefit from the market rising.
The wheel + leaps with the made premium is my favorite
Historical data says that there is a slight delta premium placed on puts for the cash safety premium that the premium for writing calls will not over. There is a slight but real premium difference between calls and puts of the same absolute distance from the current stock price
you can do covered calls and use margin for selling puts
What about covered puts?
Slightly bullish lots of long term protection cuz the stock will rarely go to zero
Which are your favorite stocks?
Just use both
Selling ITM puts then? Get assigned, sell calls for the same price or to avoid assignment roll the position.
Yeah selling an ITM put is the same as selling an OTM covered call, so that would be fine. I just prefer to always sell covered calls to keep it simple.
Sell in the money put in a rising stock to benefit from price appreciation. If put is still in the money on expiration day, roll it out to the next expiration date, for a net credit. You don't have to accept assignment. Upward bias in the market assures your put will eventually expire out of the money. Rinse and repeat.
So you really never use the wheel strategy?
What if you sell the puts with a strike price that is in the money??
You collect larger premium for ITM option then get assigned and have to buy 100@ strike price just have to make sure that the premium you collect is high enough to cover the move
Starting 2022 January none of the strategy would work untill 2023 May...
That’s incorrect
How much are you down this last year? Must be a crap-ton considering covered calls get slaughtered in a Bear market. Everyone is a genius in a Bull market.
I disagree with this 😊
Why?
Bad advice here.
Selling puts when the stock is falling = not performing better. Think again here
Better than covered calls, but still not good. Neither is good in a down market, which is exactly my point. There's really no use for puts.
@@MoreMoneyLessProblems So what do YOU do when your covered call gets assigned? Because your rising stock theory will result in assignment a lot. So what’s your next step? Not selling a put?
Gains is gains, not such thing as missing out, you just being too risky
Thank you for this gem 💎❤️
The BIGGEST Mistake You're Making when Selling Options (Video)
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Cboe Covered Calls vs. Cash Secured Puts Comparison
imgur.com/a/PRM264k
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